War veterans have served us and our country and therefore the US Government has put in place special financing as a way to honor them and their sacrifices made.
“VA loans are open to borrowers with below-average credit, require no mortgage insurance and the rates are as favorable as those given to people with stellar credit scores in non-VA loans.
Millions of veterans, including members of the National Guard and reserve units, are eligible. These home loans are also available to anyone on active duty and widows whose spouses’ deaths were war-related.
With a VA loan, the government covers the lender’s losses for up to 25% of the loan amount if you default. That gives the bank or mortgage company the same protection as if you had put 25% down on the home, so they can offer lower mortgage rates on a loan for which it’s easier to qualify.
Here are 5 ways you can benefit:
Benefit 1.You don’t need any money for a down payment.
This is the only major loan program we know of that still allows borrowers to finance 100% of a home’s purchase price.
Benefit 2.There is no monthly mortgage insurance premium.
Borrowers with less than 20% equity in their homes usually have to buy mortgage insurance that protects their lenders from default. The premiums typically boost their monthly payments by $100 to $200.
Instead of that, VA loans have a one-time funding fee that ranges from 0.5% to 3.3% of the loan, depending on the type of mortgage and whether the borrower made a down payment.
But you don’t need to pay the funding fee in cash. It can be rolled into the amount you’re borrowing.
The funding fee is also waived for most widows and vets with service-related disabilities.
Benefit 3.You can qualify despite damaged credit and more debt.
The government doesn’t set minimum income or credit score standards for VA loans. Each bank or mortgage company has its own requirements, and the government doesn’t guarantee any veteran can get a loan, nor does it force banks to lend to anyone.
However, lenders across the country say the minimum credit score to qualify for a VA loan is about 570. It’s almost impossible to qualify for any other mortgage with a subprime credit rating like that.
Even a recent bankruptcy doesn’t mean you aren’t eligible for a VA mortgage.
Most VA lenders require two years’ distance between the discharge of Chapter 7 bankruptcy and a mortgage application. If you filed for Chapter 13, you only have to wait one year. The lender, however, will want to see good credit re-established and a clean record of on-time payments since the discharge.
Benefit 4.The Department of Veterans Affairs won’t let you pay too much — or buy a substandard house.
The government assigns an appraiser that’s been trained and approved by the VA to inspect and value any home you want to buy. Because they are not paid by the bank or real estate agency, these appraisers can give you an unbiased appraisal.
“It’s the best and most accurate appraisal there is, period,” says John Parker, a VA loan specialist at Supreme Lending Mortgage Banker in Dallas.
If the inspector finds significant damage or structural problem with the house, the VA requires it to be fixed before closing.
Benefit 5.The interest rates are low.
Lenders typically charge what they would for a non-VA loan given to customers with good credit, and that’s usually the best rate the bank or mortgage company offers.
With non-VA loans, borrowers pay a higher rate for every 20 points their credit score drops below 720. But with a VA loan, borrowers get the same low rate, whether their credit score is 605 or 790.”
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