Veterans Affairs mortgages, or VA loans, are flexible, government-backed loans that were created to make it easier for veterans and military families to buy a home. First introduced in 1944 as veterans were returning from World War II, the VA loan program has made it possible for about 22 million eligible veterans and active military personnel to become homeowners. If you’re a veteran, active duty service member, or surviving spouse who hasn’t remarried, you may qualify for a VA home loan, too. Here are a few benefits of the VA loan you should know about.
Relaxed qualifying standards
Unlike some other types of mortgage loans, VA home loans have less stringent qualification criteria. For example, the VA doesn’t set a minimum credit score requirement or maximum debt-to-income ratio to qualify for the VA loan. As a result, qualified veteran or military borrowers with less than perfect credit or a higher debt-to-income are often still able to secure a VA loan, depending on the lender they choose.
No down payment requirement
One of the biggest advantages of the VA loan is that they are usually available with no down payment. When compared to conventional mortgage loans, which often require a down payment of at least 5 percent, VA loans offer veterans and military families more flexibility when buying a home.
No private mortgage insurance
With conventional and FHA loans, borrowers are required to pay mortgage insurance if they put less than 20 percent down on the home. This additional fee varies in cost and is added to the monthly mortgage payment until borrowers build 20 percent equity in their home. While VA loans do not require private mortgage insurance, they do have a VA Funding Fee, which goes directly to the Department of Veterans Affairs to keep the program running for future generations. This fee is included in the loan amount and is waived for veterans with service-connected disabilities.
Lower average interest rates
VA loans typically have lower interest rates than conventional mortgages. Because the VA guarantees a portion of every VA loan, mortgage lenders assume less risk on the loan and are able to offer borrowers more competitive rates. Even a 1% difference in a mortgage interest rate can add up to significant savings over the life of a loan.
VA loans are a lifetime benefit
VA loans provide a lifetime benefit to those who have served our country. Veterans and military members who qualify for the VA mortgage program can reuse the program over and over again. It’s even possible to use the program to secure up to two active VA loans at one time, which often occurs when a service member purchases a home and then has to move due to a permanent change of station.
As you can see, the VA loan eliminates many of the barriers to homeownership that veterans and members of the military may face. At River City Mortgage, we’re proud to help veterans and military families take advantage of the many benefits VA home loans provide. Contact us today to learn more and start the journey to homeownership.