Veterans, who are interested in home buying, are more interested in taking out VA mortgages. It should also be noted here that VA loans remains as one of the mortgage options which don't require the borrowers to pay a down payment. Around 22 million veterans and active military members have taken out VA loans. The loan is partially guaranteed by the Veteran Affairs Department and is made through a private lender.
Here are some of the things that you should know about VA mortgages before applying for it:
Eligibility criteria: In order to qualify for a VA loan, you will have to be a member of military, veteran, reservist or National Guard. Apart from that, the spouses of military members who died while on active duty or as a result of a service-connected disability may also qualify for VA loans. Also, active duty members who have been in service for 6 months can also qualify for a VA loan. But Reservists and members of the National Guard have to wait for six years to apply for VA loans. However, in case, if they are called to active duty before that, they gain eligibility after 181 days of service.
Advantages of a VA loan: VA loans have advantages of their own. Unlike other loans, VA mortgages have the option of "no down payment". This is a huge plus point. Apart from this, VA loans also don't require any kind of mortgage insurance. This will help the VA borrowers to save quite a significant amount of money.
Fees and costs: Although the VA loans are available at a low cost compared to that of other mortgages, still you will have to pay a one-time funding fee. People in armed forces getting a VA loan for the first time, with zero down payment, would pay a fee of 2.15% of the loan amount. Those using the VA loan program for the second time, without a down payment, would pay 3.3% of the total loan amount.
Underwriting guidelines: It should be noted that VA does not have a requirement for credit scores. But, the lenders have their own requirements and may want you to have a score of around 620 or more. Apart from this, the VA guidelines allow veterans to use their home-loan benefits after 1-2 years of bankruptcy or foreclosure. However, you should remember that VA loans are available only to finance primary homes. VA loan limits vary from one county to another, but the amount ranges from $417,000 to $1,094,625.
Loan default: VA also offers assistance to borrowers who have defaulted on your loan payments. The VA will also negotiate with the lenders on behalf of the borrowers who are facing financial hardship. They will also help the borrowers to negotiate repayment plans, loan modifications and other alternatives to foreclosure.