If you are active duty, a veteran or the beneficiary of a military spouse, you may be eligible for a VA home loan. This blog will review what a VA Loan is, who is eligible and its pros and cons.
What Is a VA Loan?
VA loans are a mortgage backed by the U.S. Department of Veterans Affairs. They are offered by various lenders nationwide, making it easy for those with military affiliations to apply. They offer a fixed-rate mortgage with no downpayment required, making it easier for buyers to purchase a home.
According to VA.gov, 90% of VA loans are made without a down payment. This type of mortgage has flexible credit score requirements and mostly depends on lender requirements. Most lenders require a minimum credit score of 620, although some may approve a credit score as low as 550. Proof of income is requested to ensure the individual will be able to make monthly mortgage payments. Your credit score will vary based on your lender and the credit reporting bureau used.
VA loans are specifically designed to assist active-duty service members, veterans and/or their survivor spouses so they can buy, build or refinance a home. A VA loan is considered a benefit earned through service in exchange for the risks and sacrifices of military duty. VA loans were created to support homeownership for military service members, help veterans transition to civilian life, encourage homeownership without high risk, support military readiness and promote economic benefits to communities.
Who Qualifies for a VA Loan?
Before you can apply for a VA loan, you must get a certificate of eligibility (COE) to show proof of service so a lender can qualify you for a VA-direct or VA-backed home loan. You can request a COE through the VA.gov website for housing assistance by logging in and filling out the request. To get a COE, you will need the following:
- Driver's license or government-issued ID
- Recent W-2, pay stubs and bank statements
- A signed statement of service is you’re an active-duty service member
- Discharge or separation papers if you’re a veteran
- Marriage certificate or license if applying as a surviving spouse
According to Bankrate.com, active duty service members must have served for at least 90 continuous days, meaning there were no breaks in service during that time. Veterans must visit the VA website to determine requirements based on when they served. Finally, the home being financed or refinanced must be your primary residence.
How To Get a VA Loan?
You can apply for a VA loan at a financial institution or mortgage lender of your choice. Lender requirements will vary, as will interest rates. Shop around for a VA lender that will offer you the best rate and has the requirements that fit your financial situation.
A smart approach is to get pre-approved, so you will know your loan amount limit and what the monthly payments will be. A pre-approval shows you how much home you can afford, so you can be realistic about house hunting and stay within your budget.
Once you are pre-approved, start shopping for a home. According to Bankrate.com, you can contact a local Veterans Service Organization if you need assistance finding all the local VA loan lenders in your target area.
Things You Should Know Before Applying for a VA loan
There are a few details to keep in mind with a VA loan. During the home-buying process, you will need a VA-approved appraiser to determine the home’s value. A VA appraisal is not a home inspection. The appraiser will assess whether the property meets the VA’s minimum property requirements. According to Bankrate.com, some of the main areas of focus will be:
- Space requirements
- Property access
- Hazards
- Utilities
- Swimming pool
- Home structure and any signs of deterioration
- Proximity to airports
Hiring a VA-approved appraiser will speed up the closing process. Having an appraiser inspection does not serve as a home inspection; you’ll need to have this completed as part of the lending requirements.
How Travis Credit Union Help
Travis Credit Union was founded on Travis Air Force Base in 1951 and deeply understands the needs and experiences of those with military service and their families. TCU offers a VA loan with zero down payment. Plus, our competitive interest rates can help you save on your monthly payments.
If you’re interested in other types of TCU mortgages or home equity loans, our knowledgeable mortgage loan experts can help you find the right loan for you. Apply today or get prequalified at TCU so you can start house hunting soon.