Veterans of the U.S. Armed Forces, active-duty service members, reservists and some qualifying family members may be entitled to apply for a VA loan. These loans are backed by the Department of Veterans Affairs, so while the loan is funded through the banks and mortgage companies just like a conventional loan is, the VA guarantees a portion of the loan against loss, enabling the lender to provide you with more favorable terms and making it a desirable choice when buying a home. Here are a few things you should know before using your VA Loan:
- VA loans are reusable
- VA loans can only be used for primary residences
- You don’t have to pay for private mortgage insurance with a VA loan
- VA loans come with a funding fee
- Only some people qualify for a VA loan
- You can buy a house with nothing down
VA Loans Are Reusable
There is no limit to how many times you can use a VA loan. This is a lifelong benefit for those who have served our country. As long as you have paid off your first VA loan, you can apply for another.
VA Loans Can Only Be Used for Primary Residences
As valuable as VA loans are, they can’t be used for everything. For instance, you can’t use your VA loan benefit if you want to invest in a commercial business. They’re more along the lines of helping you get into a home, condominium or other primary residence. Here are a few examples:
- Single family residence
- Multi-unit property (with requirements)
- New construction
- Refinancing a current mortgage
- Manufactured and modular homes
You Won’t Pay PMI
Private mortgage insurance, or PMI, is a type of insurance to protect your lender if you default on your payments. If you use a VA loan, the U.S. government (specifically, the VA) guarantees part of your loan – and your lender can’t make you pay for PMI. PMI is usually required when you put down less than 20 percent of the home’s sales price, so not having to pay for it will end up saving you a lot of money each month.
You Will Have to Pay a VA Funding Fee
Despite not having to pay for mandatory mortgage insurance, you’ll still have to pay a fee. You have to pay the VA funding fee, which is what pays to run the entire program. This fee must be paid when you acquire the loan and when you apply for a refinance loan. However, this fee can be combined with the loan amount you have to pay back. In addition, you may be able to have this fee waived if you have a disability.
Who Qualifies for a VA Loan?
To qualify for a VA Loan you must be an active military service member, a member of one of the military’s reserve components, or a qualifying veteran. You must meet the eligibility requirements. It’s a good idea to check with your local VA Office to make sure you meet those requirements before applying. If you meet the eligibility requirements then you can apply for a Certificate of Eligibility. And while the VA does not set credit score requirements, individual lenders do – but fortunately, lenders are not allowed to turn you down for a VA loan based solely on your credit score. Lenders are legally required to look at your whole financial picture.
You can learn more on the VA YouTube channel:
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