You’ve given a great deal to your country during your, or your loved one’s, time in uniform, and now you’re looking to buy a house. Veterans Affairs home loans are one way the United States gives back—through government-subsidized, no down payment loans that can help veterans get that much closer to their own house.
If you are a current or former member of the armed forces or a qualifying family member, you can finance 100% of the cost of your house without being required to pay mortgage insurance. That said, your credit score can still affect your interest rate.
Current members of the military and National Guard
Veterans who served in the military or National Guard for 90 consecutive days during wartime
Veterans who served in the military or National Guard for 181 consecutive days during peacetime
Veterans who were discharged or released from active duty for a service-connected disability
Spouses of personnel who died in the line of duty
There are other qualifying borrowers in special circumstances, so if you believe you may qualify, it’s best to speak with a VA loan specialist or lender for more details. You will still need to have satisfactory credit and show proof that you have enough income to keep up with the monthly payments. Also, it’s important to keep in mind that the loan is provided by a private lender—not the VA—though the VA does guarantee a portion of the loan, allowing veterans to receive loans with no money down and without having to pay mortgage insurance.
Fees and interest rates aren’t the only factors to take into consideration. Here are some more things to look at when comparing lenders:
Loan size: Being that there’s no down payment, with a VA loan you will finance the entire mortgage. Make sure that the lender you go with can approve a loan up to and including the entire cost of the house.
APR: The Annual Percentage Rate, or APR, is the interest rate plus processing fees and points, which gives you an overview of the combined yearly cost of the mortgage. This is the figure to look at when trying to determine the total annual cost of your investment. With VA loans, the recipients are typically required to pay a one-time funding fee. The amount varies, depending on factors including if a down payment was made and the type of veteran. These fees can range from 2.15 percent to 3.3 percent.
Credit: VA loans don’t require a specific minimum credit score, but for the most part lenders are going to want you to have at least a credit score of around 620. While the VA loan does help you get a house with no money down, it can’t keep you from getting a high interest rate if your credit score is low. If this is the case, look for lenders who will still finance, and will also provide interest rates that are reasonable.
Loan terms: Take a long hard look at the type of loan terms that you think are best for your budget, and negotiate accordingly. The shorter the mortgage the higher the monthly payment, though you will pay less interest, and therefore less in total than you would with a longer mortgage term.
Customer service: Becoming a homeowner can be a dream come true—and a headache at times. While maneuvering the mortgage process, you’re better off with a lender who can provide you reliable customer service.
No down payment
This really can’t be overstated. Often the biggest obstacle for first-time homeowners is getting the money together for a down payment. For a $300,000 house, a relatively small down payment of 10 percent is still $30,000, which can be hard to come up with, especially with all the other fees that come with buying a home.
Many people have the monthly income necessary to pay for a mortgage, but without the money for a down payment, they can’t get out of the starting gate. VA loans take care of this hurdle, and help servicemen and women get a place of their own.
No mortgage insurance
Because the loan is guaranteed by the government, you won’t have to put down mortgage insurance. This can save you a significant amount of money as mortgage insurance can easily be into the hundreds of dollars per month.
They’ve got your back
If you have trouble making your mortgage loans, the VA can work on your behalf with the lender in order to help you negotiate new payment plans or charges to your loan. With a VA loan, you aren’t on your own.