When it comes to taking out a home loan, there are numerous financing options to choose from. The one that works best for you will depend on different factors including your budget, financial history, and even the loan term you are looking for. The VA home loan program is a great option for those in the military currently or for qualifying veterans. This type of loan is offered by private lenders but is partially backed by the Department of Veterans Affairs. VA home loans offer various benefits over other types of home loans. Here's what you should know.
Whether or Not You Qualify
The first thing that you will need to look into is whether or not you meet the necessary qualifications for this type of loan. Members of the military, reservists, veterans, and members of the National Guard are all eligible to apply for VA home loans as are spouses of military members who died on duty or have a service-related disability. Active-duty members of the military typically qualify after six months of service while reservists and National Guard members typically qualify after six years of service.
No PMI
If you are taking out a mortgage, chances are that you have heard about private mortgage insurance, or PMI. This type of insurance is needed if your down payment is less than 20 percent and it protects your lender if you are unable to make your payments. The good news is that PMI is not required on VA loans; however, other fees do apply. Funding fees are something that you will have to pay if you are taking out a VA loan. These fees range from 1.25 to 3.3 percent of the total loan value.
Financial Requirements
VA loans are different from other types of home loans in that they do not have any official requirements for your credit score, income, or debt-to-income ratio. However, that doesn't mean that you can borrow however much you want. Most lenders who offer VA loans have their own standards that you will need to abide by in order to obtain this type of financing. Typically you will need a credit score of at least 620, proof of steady income, and a debt-to-income ratio that does not exceed 41 percent.
If you are considering taking out a VA home loan, there are a few things that you should know. First, requirements for this type of loan can vary and you will want to check to ensure that you are eligible. PMI is not needed but there are funding fees for this type of loan. Even though there are no set financial requirements, since these loans are offered through conventional lenders you will typically need a healthy credit score and a certain debt-to-income ratio to be approved for this type of loan.
Share29 July 2019
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