5 Benefits of a VA Loan

VA loans are one of the most lucrative options for veterans, current military members, and their surviving spouses. The benefits of a VA loan often outweigh any other mortgage option, helping those who served our country buy a home at attractive terms.

If you aren’t sure if a VA loan is right for you, keep reading to learn how you can benefit.

What are VA Loans?

VA loans are a program specifically for veterans, active military members, and surviving spouses. It has helped millions of families own homes much faster and at much better terms than other loan options.

While you may have many loan options, you must know the top VA loan benefits you can enjoy.

The Top VA Loan Benefits

VA loans have many benefits. Consider these top reasons to use VA financing if you’re a veteran with VA home loan benefits.

No Down Payment

You can borrow 100% of the sales price, which is the largest advantage of VA loans. As a result, veterans and current military members can buy a home much sooner because they don’t have to wait to save money for a down payment.

You’ll see savings if you compare VA loans to conventional and FHA loans. Conventional loans require a 3% down for first-time buyers, and FHA loans require a 3.5% down on a home. That’s a savings of $3,000 – $3,500 per $100,000 in sales price.

Since it can be difficult for military members to save when constantly moving, the VA home loan benefit makes it much easier to own a home faster. In addition, you can use the saved funds for closing costs or other costs of buying a new home.

Competitive Interest Rates

Veterans can benefit from the VA’s competitive interest rates in a market with increasing interest rates. In addition, VA rates are typically lower than FHA and conventional loan rates because of the VA’s guarantee for lenders.

No Mortgage Insurance

Typically if you put down less than 20% on a home, you must pay mortgage insurance. For example, conventional loans require Private Mortgage Insurance until you owe less than 80% of the home’s value, and FHA and USDA loans require mortgage insurance for the life of the loan, no matter how much you owe.

VA loans, however, don’t require mortgage insurance even with no down payment. This saves veterans money and makes it easier to qualify for a mortgage because the payment is lower without mortgage insurance.

Flexible Underwriting Requirements

Another great benefit of VA loans is the flexible underwriting requirements. Even with no down payment required, the VA allows simple qualifying requirements, including the following:

• Low minimum credit score requirements – Veterans can get approved for a VA loan with no down payment with credit scores as low as 620. Each lender has different requirements regarding the required credit score, but it’s possible to get approved with less-than-perfect credit.

• High debt-to-income ratios allowed – The VA doesn’t have a maximum debt-to-income ratio they allow. However, lenders typically allow DTIs of 43% – 50%. This means that your total debts, including the new mortgage, can take up as much as 50% of your income.

• Reachable disposable income requirements – The VA requires borrowers to have a minimum disposable income to cover the daily cost of living. However, the requirements are low and achievable for most families.

• Short waiting periods after bankruptcy or foreclosure – Negative credit events, such as bankruptcy or foreclosure, usually cause borrowers to wait many years before getting financing, but VA loans have more flexible timelines. This allows veterans to bounce back after a negative event quickly.

No Loan Limits

VA loans don’t have a limit, like FHA loans. Instead, the VA allows loan amounts as high as a borrower needs, as long as you can prove you can afford it. The no loan limits apply to a veteran’s first use of the program. If you’ve used the program before, you may have lower limits and have to make a down payment of 25% of the difference between the needed loan amount and your VA loan limit.

 

Final Thoughts

VA loans have many benefits for veterans. If you served in the military, didn’t have a negative discharge, and have full entitlement, using your VA loan benefits may provide the most lucrative options for your home financing needs. VA loans can be a great option whether you’re a first-time homebuyer or have owned a home before.