Is a VA Home Loan Right For You?
Generally, active service of 90 days in wartime and 181 days in peacetime meets the minimum requirement to qualify if your service was before September 7, 1980. After this date, you may have to meet a 24-month requirement of continuous active service. There are exceptions to this, such as injury, troop reductions, and certain medical conditions.
If you're a veteran who is considering purchasing a home, you should know that the U.S. Department of Veterans Affairs has a special loan program that may make home buying easier and more affordable for you. Here are some important considerations that will help you determine if a VA loan is the right choice for you.
Who is eligible for a VA Loan?
Your eligibility for a VA home loan depends on when you served, whether your service was in peacetime or wartime, and the length of your service.
Keep in mind that applications for eligibility could be delayed if you were discharged with any status other than an honorable discharge. While these guidelines are generally true, it is important to check with the VA for full eligibility requirements or to discuss your particular situation.
If you are the spouse of someone who has died in active military duty or as a result of a disability suffered in active duty, you may also be eligible for a VA loan. Thanks to the Veterans Benefits Improvement Act of 1994, those who serve at least six years in the National Guard or Selected Reserve have become eligible as well.
Why a VA Loan May Save You Thousands Over a Conventional Home Loan
Veterans seeking to own a home should know that a VA home loan has tremendous benefits over a conventional loan.
First, no down payment is required for these loans. Conventional home loans require at least a 3-5% down payment. Most financial advisors recommend that you put as much money down as possible so that you pay less over the life of your loan. However, if you can't afford 3-5% up front but you still would like to own your home, the VA loan may be right for you.
A second way VA loans save homebuyers money is that no monthly mortgage insurance is required. Since the United States government backs these loans 100%, mortgage insurance is not necessary.
Closing costs are lower also. In a VA loan, the government limits closing costs. Closing costs (up to 4%) can be paid by the seller of the home.
Interest rates offered in a VA loan are often comparable to those offered in conventional loans that require a large down payment. More credit flexibility means you may be eligible for a VA loan even if you would be turned down for a conventional loan. There is also no prepayment penalty, which could save you even more money when you pay early.
Other VA Loan Considerations
When weighing the options for your next home purchase, there are a few other things you should know. First, the law requires a funding fee on each VA loan. The amount of the fee varies, but first-time homebuyers can expect to have about two percent added to the loan amount for this fee.
It is also important that you make sure the lending institution is approved by the VA and can service VA home loans. Not every lender can make VA loans available to you. You may want to consider seeking a lender who specializes in VA loans. Not every lender has someone who specializes in them. Finding someone who specializes in VA loans may make the process more seamless.
Keep in mind that interest rates and closing costs vary by loan originator in both conventional and VA loans. While a VA loan is likely to keep your costs lower than the conventional route, it is still wise to shop around.
You cannot use a VA loan to purchase rental property, and purchasing a mobile home may be a little more difficult through a VA loan than the purchase of a regular home or a new construction.
How To Apply For a VA Loan
Often the easiest way to determine whether you're eligible for a VA home loan is through your lender. Your lender can submit an ACE, or Automated Certificate of Eligibility, and can often receive confirmation of your eligibility within seconds.
If the administration's records are incomplete, however, you may need to manually apply by filling out a VA form 26-1880. You'll want to include a copy of your discharge documentation and proof you've paid your prior VA loans in full (if any) for faster processing. More details about the application process and the necessary forms can be obtained by visiting the VA's website at http://www.homeloans.va.gov
Where To Go For More Information
If you would like more information on VA Home Loans and other VA benefits, you can call (800) 827-1000 or visit http://www.homeloans.va.gov. If you don't qualify for a VA Loan, then you might try here for mortgage information.