VA home loans bring significant advantages, assisting millions in realizing their homeownership dreams. Despite this, the U.S Department of Veterans Affairs estimates that only a small fraction of eligible veterans utilize these government-guaranteed loans. A much greater percentage could potentially benefit. Here are ten crucial aspects of VA loans that could guide you to the best mortgage solution for your circumstances.
Zero Down Payment. VA loans allow qualified borrowers with full entitlement and a loan amount above $144,000 to buy a home without a down payment. Compared to FHA and conventional loans that typically require a down payment ranging from 3.5 to 5 percent, this benefit offers tremendous relief to military homebuyers who might otherwise need to save for several years.
No Requirement for Private Mortgage Insurance. Unlike conventional loans requiring private mortgage insurance (PMI) for less than 20 percent down payment or FHA and USDA loans that mandate it, VA loans require no PMI. The absence of monthly PMI payments can enhance VA borrowers' buying power and result in significant savings.
Competitive Interest Rates. Government backing of VA loans encourages lenders to offer favorable rates. Data has consistently shown VA loan rates to be amongst the most competitive in the market. Since Ellie Mae, a loan software firm, began tracking in November 2014, 30-year VA loan fixed rates have generally been lower than conventional and FHA loans.
Lenient Credit Requirements. The Department of Veterans Affairs does not enforce a minimum credit score for VA loans but encourages responsible lending. Lenders may have varying standards, but usually, these are more forgiving than those of conventional mortgages. Notably, VA loans are more accommodating towards borrowers recovering from bankruptcy, foreclosure, or a short sale.
Flexible Debt-to-Income Ratios. The VA does not enforce a specific debt-to-income (DTI) ratio. While most lenders prefer a DTI at or below 41 percent, some may offer flexibility based on credit score and other financial aspects. This leniency can provide VA borrowers with expanded purchasing power.
Reduced Closing Costs. Another substantial advantage of VA loans is the reduction in closing costs. The VA caps seller concessions at 4% of the loan amount, which may include various benefits like prepaying taxes and insurance, interest rate buydowns, paying off judgments or credit balances, and even gifting household appliances. Additionally, the seller can cover the borrower's closing costs that aren't included in the 4% calculation, along with customary discount points.
Lifetime Benefit. Eligible veterans with full entitlement can borrow as much as their lender is willing to provide, allowing them to use the VA loan program for future home purchases. Basic eligibility criteria include specific durations of service or being the spouse of a service member, although these may vary depending on the era of service.
Eligibility for Surviving Spouses. Surviving spouses of military members who died while on active duty, or as a result of service-connected disability, may qualify for VA loans provided they haven't remarried. Eligibility also extends to spouses of veterans who were missing in action, prisoners of war, or totally disabled before death under certain conditions.
Variety of Loan Solutions. VA loans come in various forms tailored to specific needs. These include Jumbo VA loans for higher-value properties, Purchase VA loans for home buying, VA Cash-Out Refinance for refinancing existing loans, and Interest Rate Reduction Refinance Loans (IRRRLs) for refinancing properties previously purchased with a VA loan. For comprehensive advice on the ideal loan for your financial circumstances, consult our expert Mortgage Advisors.
Extended Utility Beyond Home Purchasing. While VA borrowers cannot use the funds to buy a second home or an investment property, the loan can be used for more than home purchasing. Eligible borrowers may use the funds for building, improving, or refinancing a home, buying and improving a manufactured home lot, adding energy-efficient improvements, or simultaneously purchasing and improving a home with energy-efficient additions.
Do You Qualify? If you're a veteran, reservist, active duty member, or surviving spouse, CrossCountry Mortgage is offering a $1,111 lender credit on all Federal VA loans initiated from November 1 through November 30. For more details or any additional information, please feel free to reach out.
Note: The maximum Loan-to-Value (LTV) on a cash-out refinance is 90%.
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