If you’ve served in the US Armed Forces, you most likely qualify for a VA home loan. These can make owning your own home a reality for those who would not be able to afford a conventional home loan, and can come with quite a few additional benefits. However, understanding VA home loans before you jump into the process is important. Let’s explore some of the most important facts you need to know.
- They Only Work for Certain Types of Homes
One thing that often surprises veterans is the fact that VA loans can only be used to purchase certain types of homes. In most instances, you can only use your VA benefit to purchase a single-family home. Also, it must be basically ready to move in (no fixer-uppers). Most of the time, they cannot be used to purchase other properties, such as farms, either. However, your loan can be used for some multi-unit properties, as well as for modular homes and even condos.
- You Don’t Actually Get Them from the VA
Another fact that often surprises veterans is that your VA loan doesn’t actually come from the VA itself. The Veterans Administration is not a lender – they work with lenders to offer “officially-backed” loans. You’ll need to find a lender that is approved to offer VA loans to veterans.
- They Do Come with Fees
While your VA loan will technically be available with no down payment, don’t make the mistake of thinking that they’re “no cost” loans. Almost all VA loans come with a fee at the beginning. In most instances, this is a percentage of the total cost of the loan. For instance, a $0 down loan for someone taking out their first VA loan would require that you pay 2.15% of the total loan cost up front. If you make a 10% or higher down payment, that drops to just 1.25% of the loan’s total value.
- You Can Qualify Even without Perfect Credit
While conventional banks and other lenders might only want to work with consumers who have perfect credit, VA loans are often available to those with a less than sterling financial history. In fact, many VA-approved lenders will offer a mortgage loan to those with credit scores around 620, which is roughly 100 points lower than what other lenders will offer.
- Foreclosure and Bankruptcy Don’t Matter as Much
For most consumers, a bankruptcy or foreclosure can mean serious ramifications. Some struggle to recover and become homeowners once more. However, for veterans, VA loans come with few repercussions. In fact, you can usually obtain a VA loan just two years after a foreclosure or a bankruptcy. If you went through a short sale instead of a foreclosure, there may be no waiting period at all.
- Not One-Time Use
Interestingly, many veterans assume that they can only get a VA loan one time in their lives. However, that’s not true. You can apply for VA loans multiple times – as long as the previous loan is paid off. In some instances, you may actually be eligible to have more than one VA loan at a time.
- Help When You’re Struggling
A significant advantage of VA loans is the fact that if you find yourself struggling to make payments, the VA can actually step in and negotiate with the lender, helping you out during your financial difficulties.
As you can see, there are quite a few benefits to be had with VA loans, and in many instances, surviving spouses and sometimes children of veterans can be approved for these loans as well.