Are you a military service member or veteran dreaming of owning your own home? The good news is that the Department of Veterans Affairs (VA) offers a unique home loan program designed specifically for you. VA home loans provide flexible and affordable options, including purchasing a home with a low or no down payment. In this blog post, we’ll explore the benefits of a VA loan, discuss down payment requirements, and explain why a VA loan remains the best option for military and veterans, even for those who have already saved up for a down payment.
What is a VA Loan and Am I Eligible?
If you’re not familiar with VA loans, let’s start with a brief overview. A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs, designed to assist eligible veterans, active-duty service members, and surviving spouses in achieving homeownership. One of the most attractive features of a VA loan is the option for a low or no down payment, making it easier for veterans to secure a home loan.
Now, you might be wondering if you’re eligible for a VA loan. Generally, active-duty service members who have served for at least 90 consecutive days during wartime, 181 consecutive days during peacetime, or six years in the National Guard or Reserves are eligible. Honorably discharged veterans are also eligible, along with surviving spouses of service members who died in the line of duty or as a result of a service-related disability.
VA Loan Requirements
As of 2020, VA financing isn’t dictated by county loan limits if you have full entitlement. Rather, your credit rating will dictate the highest permissible loan amount.
Entitlement assures that, in the event of a default, the VA will compensate your lender the lesser of up to $36,000 or 25% of your loan amount. Your Certificate of Eligibility (COE), a document from the Department of Veterans Affairs, verifies your qualification for a VA home loan and will display the extent of entitlement you have at your disposal. Your Certificate of Eligibility (COE) which can be requested from the VA or your lender can request these on your behalf.
If you haven’t previously used your VA loan entitlement to purchase a house, or have fully reimbursed a previous VA loan (also known as “restoring” your entitlement), your COE will indicate that the base entitlement is $36,000.
With complete entitlement ($36,000), loan limits will not limit you, and you can seek a loan up to $3M with 0% down, provided you have a credit score of at least 720.
If you’ve utilized a part of your entitlement, a down payment might be necessary. Computing these numbers can be complex but our experienced mortgage experts can assist in precisely determining what is required!
Understanding VA Down Payment Requirements
One of the main advantages of a VA loan is the opportunity to buy a home with little to no down payment. Unlike conventional loans that typically require a down payment anywhere from 3%-20% of the purchase price, VA loans offer a more accessible option for borrowers.
The VA does not set a specific down payment percentage. Instead, it allows lenders to determine the amount of down payment required based on the borrower’s creditworthiness and the home’s appraised value. However, in most cases, VA loans can be obtained with no down payment at all.
VA Down Payment Calculator: How Much Do I Need?
While a VA loan allows for a low or no down payment, it’s essential to understand the potential costs involved. The VA Funding Fee is a one-time fee that helps fund the VA loan program and replaces the requirement for private mortgage insurance (PMI). The fee amount varies based on factors such as the type of service, down payment, and whether it’s the borrower’s first VA loan.
You can use a VA loan calculator available on various online platforms to determine your VA down payment amount. By entering the loan amount, down payment, and other relevant details, you can estimate the funding fee and calculate the overall cost of your VA loan.
Why Choose a VA Loan if I Already Saved For A Down Payment?
You might think, “If I have enough savings for a large down payment, wouldn’t a conventional loan be a better choice?” While conventional loans may seem appealing, VA loans still hold several advantages for military and veterans, even if a larger down payment is possible.
- No private mortgage insurance (PMI): Unlike conventional loans, VA loans do not require PMI. This can save you hundreds of dollars on your monthly payment, making homeownership more affordable.
- Competitive interest rates: VA loans often offer competitive interest rates, which can translate to significant savings over the life of your loan, even with a large down payment.
- Flexible credit requirements: VA loans have more forgiving credit requirements compared to conventional loans. This means that even if your credit score is not perfect, you still have a chance to secure a favorable loan.
- Streamlined refinancing options: VA loans provide the opportunity for streamlined refinancing through the Interest Rate Reduction Refinance Loan (IRRRL) program. This allows you to refinance your VA loan with minimal documentation and lower interest rates.
Frequently Asked Questions:
- Can I use a VA loan to buy a second home? Yes, as long as you meet the eligibility requirements, you can use a VA loan to purchase a second home. However, keep in mind that the VA funding fee may be higher for subsequent use.
- Are there any income limitations for VA loans? No, there are no specific income limitations for VA loans. However, lenders will evaluate your income and debt-to-income ratio to determine your loan eligibility.
- Can I get a VA loan if I’ve had a foreclosure or bankruptcy in the past? Having a foreclosure or bankruptcy in your credit history does not automatically disqualify you from obtaining a VA loan. Lenders will consider various factors, such as the time elapsed since the event and your credit history.
Purchasing a home with a VA loan offers military service members and veterans many benefits, including the option for a low or no down payment. By taking advantage of the VA loan program, you can achieve your dream of homeownership with greater ease and financial flexibility. Even if you have the means for a large down payment, VA loans remain the best option due to their competitive interest rates, lack of PMI, and flexible credit requirements. So, if you’re ready to embark on your homeownership journey, consider exploring the advantages of a VA loan with JVM’s expert VA loan team, and we’ll help make your dream a reality.
