What is a VA Loan?
If you’re an active or former member of the armed forces and you meet specific criteria for length and time of service, you can get a no-down payment loan guaranteed by the Department of Veterans Affairs, also known as a VA loan. Many veterans don’t even know they have this option available to them.
In addition to not needing a down payment, you do not have to pay mortgage insurance with a VA loan. The home must be for the purchase of your primary residence, as opposed for an investment property. There is a funding fee that comes with this loan, around 2 percent of the loan, which can be rolled into the loan amount. Under certain circumstances, such as a service-related disability, this funding fee can be waived.
In November of 2015, MassHousing announced a wonderful program for veterans and active duty military that makes it substantially easier for them to obtain mortgages. Some of the program’s benefits include non-spouse co-borrows are now able to be co-signors, rental income is allowable for 2 family home purchases. Condominiums are not required to go through the rigorous VA approval process.
What Are the VA Loan Requirements?
In order to qualify, you have to show that you have the ability to pay the loan amount. The VA qualifying standards include debt-to-income ratio, your income, and FICO scores. Additional qualifying requirements may vary by lender.
The debt-to-income figure is a ratio of your debt to your income. The VA prefers a debt to income ratio of less than 41%. But exceptions can be made under certain circumstances.
To reduce delays in the processing of the loan, you should be prepared to give the lender the complete names and addresses and your employee identification numbers for present and past employers covering a 2 year period. You should also have your account numbers for savings and checking accounts and all open and recently closed debts on hand.
Credit requirements for VA loans are more lenient than for conventional loans. If you’re a veteran with no credit history it’s generally acceptable to use “non-traditional” credit to show you can pay bills on time. Some examples of “non-traditional” credit would be utility, phone, or car insurance bills.
Where Can You Get a VA Loan?
You do not need to go to the Department of Veteran Affairs to get a VA loan. The Department of Veterans Affairs doesn’t lend money, they just guarantee the loan. You can apply for a VA loan with any mortgage lender that participates in the VA home loan program. You will need to get a Certificate of Eligibility from VA to prove to the lender that you are eligible for a VA loan. Lenders set their own interest rates, discount points, and closing points. You should shop around for the best rates.
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To find out how much you can borrow with a VA Loan, view the VA loan limits.
For more information about eligibility requirements for VA loans, visit the Department of Veterans Affairs website.