When it comes to financing a home, veterans and active-duty service members have a unique advantage through VA loans. These loans offer a range of benefits that can significantly impact the homebuying journey. Whether you're a seasoned veteran or just beginning to explore your options, here are 20 essential facts about VA loans that you might not know:
1. Flexible Qualification Requirements: VA loans stand out for their flexible qualification requirements compared to conventional loans. This inclusivity ensures that a broader range of veterans and active-duty service members can access these loans.
2. Origination Source: Despite being referred to as VA loans, it's important to note that these loans are not directly issued by the Department of Veterans Affairs itself.
3. Eligibility Criteria: Eligibility varies based on service. Active duty personnel must have served a minimum of 90 continuous days. Veterans of the Armed Forces, National Guard, and Reservists who meet specific criteria are also eligible.
4. Credit Scores: Unlike conventional loans, VA loans do not require borrowers to have a specific FICO credit score. Lenders establish credit score requirements.
5. Loan Limits: There are no specific loan limits for VA loans, although some restrictions apply to veterans who already own property.
6. Perpetual Benefits: VA loan benefits never expire, providing veterans with long-term advantages.
7. Down Payment and Funding Fee: VA loans are known for not requiring a down payment. However, veterans must cover closing costs, and a funding fee is charged by the VA.
8. Versatile Property Types: VA loans can be used to purchase various types of properties, including single-family homes, townhomes, condos, multifamily properties (up to 4 units), and manufactured homes.
9. Loan Amount Limits: The maximum loan amount should be reasonable in relation to your ability to repay and the property's appraised value, considering residual income requirements.
10. Underwriting Options: VA loans offer two underwriting options: automated (AUS) or manual underwriting.
11. Certificate of Eligibility (COE): To qualify for a VA loan, having sufficient entitlement based on the COE is crucial.
12. Fresh Start After Financial Hardships: Veterans can reapply for a VA loan two years after experiencing a foreclosure, short sale, or bankruptcy.
13. Co-Borrower Possibilities: VA loans can be funded for a combination of individuals, including a veteran and spouse, two veterans, or a veteran and non-veteran.
14. Multiple VA Loans: Veterans can obtain more than one VA loan due to the two-tier entitlement system.
15. Refinancing Options: VA loans offer four types of refinancing options, ranging from non-VA to VA, streamlined refinancing (IRRRL), cash-out refinancing, and refi renovation loans.
16. Assistance for Delinquent Loans: The Interest Rate Reduction Refinance Loan (IRRRL) provides assistance for delinquent VA loans.
17. Income from Second Jobs: To use income from a second job, a minimum employment duration of one year is required.
18. Spouse's Financial Consideration: Even if a spouse's name is not on the loan (except in community property states), their debts must still be considered.
19. Enhanced Basic Allowance for Housing (BAH): Basic Allowance for Housing (BAH) can be increased by up to 125% when applying for a VA loan.
20. One-Time Construction Loans: Veterans interested in purchasing a vacant lot and constructing a home have access to a one-time construction loan, known as a one-time close loan.
In conclusion, understanding the nuances of VA loans can empower veterans and active-duty service members to make informed decisions about their homeownership journey. The range of benefits, from flexible qualifications to multiple refinancing options, makes VA loans a powerful tool for achieving the dream of owning a home. Remember to consult with a qualified lender to fully comprehend how these facts apply to your unique situation and embark on your path to homeownership with confidence.
