By Ashley Gower
Nov 12, 2024More than 21 million Veterans and service members live in the U.S., yet only about 6% have taken advantage of a VA home loan in the past five years. This percentage could be significantly higher if more Veterans understood the full scope of benefits this program offers.
Many Veterans and their families either aren’t aware of these advantages, believe the process is too complex, or haven’t worked with a lender knowledgeable about VA loans. Let’s clear the air and explore why a VA loan is one of the best mortgage options available.
- Zero Down Payment: VA loans let eligible Veterans, active-duty service members, and some surviving spouses buy a home without needing a down payment.
- Lower Costs: No private mortgage insurance (PMI) and often lower interest rates make VA loans more affordable than many other loan types.
- Flexible Eligibility: You can reuse your VA loan benefit and even refinance with VA loan options like Streamline or Cash-Out refinancing.
- Wide Property Options: Buy single-family homes, VA-approved condos, multi-unit properties (up to four units), or even manufactured homes (with land).
- Exclusive Benefits: Protections like no loan limits (with full entitlement), seller-paid closing costs, and financial counseling if you face payment difficulties make VA loans uniquely supportive.
1. No Down Payment Required & No Mortgage Insurance
One of the standout features of a VA loan is the option to purchase a home with $0 down. This is a game-changer for many Veterans who may struggle to save enough for a down payment, especially with rising home prices.
For comparison, most other mortgage options require a down payment of at least 3.5% to 5%, translating to $8,750–$12,500 on a $250,000 home. With a VA loan, that upfront cost disappears, allowing Veterans to enter homeownership sooner.
Additionally, VA loans eliminate the need for private mortgage insurance (PMI). For other loans, PMI typically adds $100–$200 per month to your mortgage payment if your down payment is less than 20%. This means VA loans save Veterans hundreds of dollars monthly.
Pro Tip: The VA funding fee replaces PMI and can be rolled into the loan amount, so you won’t need to pay it upfront.
2. VA Funding Fee Exemptions for Disabled Veterans
If you have a service-related disability rating of at least 10%, you’re exempt from the VA funding fee. This can save thousands of dollars upfront and makes the VA loan even more affordable.
For Veterans who aren’t exempt, the VA funding fee is typically financed into the loan, allowing you to avoid an out-of-pocket expense at closing. The fee varies based on your service history and loan type, ranging from 0.5% to 3.6%.
Quick Fact: Veterans receiving VA disability compensation automatically qualify for a funding fee exemption.
3. The VA Loan Benefit Never Expires
One of the lesser-known benefits of a VA home loan is its reusability. Veterans can use this benefit multiple times throughout their lifetime, provided they meet certain requirements.
Here’s how:
- Selling your home: If you sell a home purchased with a VA loan and pay off the loan in full, your entitlement is restored.
- One-time restoration: If you’ve paid off your VA loan but still own the home, you may be eligible for a one-time restoration of your entitlement.
Even Veterans who served decades ago can still use their VA loan benefit. Eligibility is based on service duration and time period, so it’s worth checking your status.
To verify your eligibility: Obtain your DD Form 214 and work with a VA-approved lender or access the VA’s eBenefits portal.
4. Surviving Spouses Are Eligible
Unremarried spouses of deceased service members may also qualify for a VA loan. This benefit offers them financial support during a challenging time.
Eligibility applies if the service member:
- Died in the line of duty.
- Passed away due to a service-related disability.
- Was missing in action or a prisoner of war for at least 90 days.
Surviving spouses are also exempt from the VA funding fee, providing additional savings.
Related Topic: Prevent Annoying Credit Offers before starting the mortgage process – Opt out at www.optoutprescreen.com
5. VA Home Loan Interest Rates Are Typically Lower
VA loans often feature interest rates about 0.25% lower than conventional loans, saving you money over the life of the loan. These competitive rates are possible because the VA guarantees the loan, reducing the lender’s risk.
Even Veterans with less-than-perfect credit scores may qualify for these favorable VA loan rates, making homeownership more accessible.
Did You Know? VA loans also boast some of the lowest foreclosure rates, a testament to Veterans’ commitment to homeownership.
6. Flexible Credit and Bankruptcy Guidelines
VA loans are more forgiving than conventional loans when it comes to credit requirements. There’s no minimum credit score required by the VA, though individual lenders may have their own criteria.
Even Veterans with a past bankruptcy or foreclosure can qualify, as long as they’ve reestablished credit for two years. This flexibility ensures that financial setbacks don’t prevent Veterans from achieving homeownership.
Important Note: If a previous foreclosure involved a VA loan, the remaining amount owed must be repaid to restore eligibility.
7. Wide Variety of VA Loan Options
The VA loan program isn’t just for purchasing a home. Veterans can choose from a variety of options tailored to their needs:
Types of VA Loans
- VA Home Purchase Loan: For buying a primary residence with no down payment.
- VA Cash-Out Refinance: Tap into your home equity for expenses like home improvements or tuition.
- VA Streamline Refinance (IRRRL): Lower your interest rate quickly without an appraisal or extensive documentation.
- VA Renovation Loan: Combine the cost of a home purchase with necessary repairs or upgrades.
- Native American Direct Loan (NADL): For Native American Veterans purchasing or improving homes on federal trust land.
VA loans are more forgiving than conventional loans when it comes to credit requirements. There’s no minimum credit score required by the VA, though individual lenders may have their own criteria.
Even Veterans with a past bankruptcy or foreclosure can qualify, as long as they’ve reestablished credit for two years. This flexibility ensures that financial setbacks don’t prevent Veterans from achieving homeownership.
8. VA Loans Are Available from Private Lenders
While the VA backs these loans, they’re issued by private lenders, such as banks, credit unions, and mortgage companies. This allows Veterans to enjoy competitive terms and the convenience of working with a local lender.
Quick Tip: The VA guarantee ensures lenders will be repaid, enabling them to offer better rates and terms to Veterans.
9. Buy Condos, Multi-Unit Homes, and More with a VA Loan
VA loans can be used to purchase a variety of properties, including:
- Single-family homes.
- Multi-unit properties (up to four units).
- Condominiums approved by the VA.
Condos are particularly attractive for first-time homebuyers, offering affordability and access to desirable locations.
Search for VA-approved condos: Use the VA’s online condo search tool to explore approved communities.
The Bottom Line:
Should I get pre-approved for a VA Loan?
VA loans offer a unique combination of affordability, flexibility, and financial protections, making them one of the most valuable benefits available to those who have served our country. With no down payment, competitive interest rates, and no PMI, they help Veterans and their families achieve homeownership without the traditional financial barriers. Beyond the cost savings, VA loans offer peace of mind through borrower-friendly terms, such as flexible property options and protections for those facing financial hardship. Whether you’re purchasing your first home, refinancing, or upgrading to meet your family’s needs, VA loans are a powerful tool to help you build a stable and secure future. If you’re eligible, it’s worth exploring how a VA loan can make your homeownership dreams a reality.
Ready to make the most of your VA loan benefits? Getting preapproved is the first step toward unlocking the advantages of this incredible program. Reach out to us today to start your journey to homeownership with expert guidance and a smooth, stress-free process. Let’s get you one step closer to your dream home!
Frequently Asked VA Loans
What is a VA loan, and who is eligible?
A VA loan is a mortgage program created by the U.S. Department of Veterans Affairs to help Veterans, active-duty service members, and certain surviving spouses buy or refinance a home. Eligibility typically requires meeting one of the following conditions:
- Serving at least 90 consecutive days during wartime.
- Serving at least 181 consecutive days during peacetime.
- Completing six years of service in the National Guard or Reserves.
- Being the un-remarried surviving spouse of a service member who died in the line of duty or as a result of a service-connected disability.
Your lender can help confirm eligibility by obtaining your VA Certificate of Eligibility (COE).
Do I need a down payment for a VA loan?
No, one of the biggest benefits of a VA loan is the option to buy a home with no down payment, making homeownership more accessible to Veterans who may not have significant savings.
What is the VA funding fee?
The VA funding fee is a one-time payment that helps keep the VA loan program running without requiring taxpayer funding. This fee is based on your loan amount, type of loan, and whether it’s your first time using your VA loan benefit.
For example:
- First-time use with no down payment: 2.3% of the loan amount.
- Subsequent use with no down payment: 3.6%.
If you have a service-related disability, you may be exempt from paying this fee. Additionally, the funding fee can be rolled into the loan amount instead of being paid upfront. – Source: VA.gov
Can I use a VA loan to refinance an existing mortgage?
Yes, VA loans offer several refinancing options:
- VA Streamline Refinance (IRRRL): Helps lower your interest rate or monthly payment with minimal paperwork and no appraisal required.
- VA Cash-Out Refinance: Lets you tap into your home equity to pay for expenses or refinance a non-VA loan into a VA loan.
Can I use a VA loan more than once?
Absolutely! The VA loan benefit is reusable as long as you meet the eligibility requirements and pay off any previous VA loan. You can also restore your benefit if you sell your home and pay off the loan completely.
Are VA loans only for first-time homebuyers?
No, VA loans are available to eligible Veterans and service members, whether they’re buying their first home or their fifth. There’s no limit to how many times you can use your VA loan benefit, provided you still qualify.
Are VA loans for second homes or investments?
VA loans are intended for primary residences, meaning the home you plan to live in full-time. You cannot use a VA loan to purchase a vacation home or investment property.
What types of homes can I buy with a VA loan?
VA loans can be used to buy a variety of property types, including:
- Single-family homes.
- Condos (must be in a VA-approved community).
- Multi-unit properties (up to four units, as long as you live in one of them).
- Manufactured homes (with land, and subject to lender approval).
Do VA loans have a minimum credit score?
The VA does not set a specific credit score requirement, but most lenders do. Typically, you’ll need a credit score of at least 580-620 to qualify. However, VA loans are more flexible with credit standards compared to conventional loans, making them accessible to borrowers with lower scores.
What if I can’t make my VA loan payments?
The VA provides financial counseling to borrowers who are struggling with payments. Additionally, because VA loans tend to have lower foreclosure rates, lenders may be more willing to work with you to find a solution, such as loan modification or repayment plans.
Do VA loans have loan limits?
If you have full VA entitlement, there are no loan limits, meaning you can borrow as much as a lender approves without a down payment. However, lenders will still evaluate your income, credit, and debt-to-income ratio to determine how much they’re willing to lend.
Can sellers pay for closing costs on a VA loan?
Yes, VA loans allow sellers to contribute to the buyer’s closing costs, up to 4% of the loan amount. This can include paying off debt to help the buyer qualify or covering prepaid expenses like property taxes and homeowners insurance.
Are there any special protections with a VA loan?
Yes, VA loans come with a built-in Escape Clause that protects buyers. If the home’s appraised value is lower than the purchase price, you can back out of the deal without losing your earnest money deposit.
Ready to see what you can afford? Contact us today to discuss your home-buying goals and take your first step toward financial freedom.
Equal Housing Lender. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. The pre-approval may be issued before or after a home is found. A pre-approval is an initial verification that the buyer has the income and assets to afford a home up to a certain amount. This means we have pulled credit, collected documents, verified assets, submitted the file to processing and underwriting, ordered verification of rent and employment, completed an analysis of credit, debt ratio and assets, and issued the pre-approval. The pre-approval is contingent upon no changes to financials and property approval/appraisal. *Veterans Affairs loans require a funding fee, which is based on various loan characteristics. Sales price cannot exceed appraised value. Refinancing an existing loan may result in the total finance charges being higher over the life of the loan. Offers may vary and are subject to change at any time without notice. Interest rates are subject to change daily and without notice. *On an Interest Rate Reduction Refinance Loan (IRRRL) the Veterans Affairs does not require an appraisal, but NFM Lending may require a drive-by-appraisal. Income documentation is not required, but source of income must be verified. **Purchases only, must have Automatic Underwriting System (AUS) approval. No cash-out under 600. †Sales price cannot exceed appraised value. ††In a purchase transaction, reasonable closing costs may be paid by the seller, and the program is available with no points depending on credit profile, collateral, and current mortgage history.
These blogs are for informational purposes only. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. Should you have any questions about the information provided, please contact us.