VA Loans are no-down payment loans that have helped more than 22 million service members become homeowners since 1944. They’re called VA Loans after the Department of Veterans Affairs, which introduced them in 1944 as part of the GI Bill. Through the first half of 2018, 8% of home purchases were made with a VA loan.
But really it’s not just service members. VA loans are available to active military members, veterans, and widowerd spouses of service members. The terms of VA loans are so attractive, that eligible homebuyers would be amiss to not consider (and generally choose) them.
So What Should You Know About VA Loans?
They Don’t Require a Downpayment
Or prohibit one either. 80% of these loans are issued without a down payment, but a borrower can provide a downpayment if they’d like to and can.
There’s No Limit to How Many VA Loans You Can Have
You only have one VA loan at a time, but once you’ve paid off one you can take out another. Rinse and repeat.
They’re Only For Certain Types of Homes
Work-Live spaces, working farms, vacant land, co-ops, and fixer-uppers are out. VA loans can only be taken out on move-in ready homes (not businesses). This can include single-family homes, condos, modular housing, some multi-unit properties and more.
VA Loans Are For Primary Residences
These loans aren’t available for vacation homes or investment properties. You must live in your new home as your primary residence, but it can be a multi-unit building like a duplex. You can buy a pre-existing home or have one built, or refinance a home.
The Dept of Veteran Affairs Doesn’t Issue The Loans
Your VA loan won’t be issued by the VA. You can borrow from a wide selection of lenders, and shop around with a Mortgage Broker. The VA provides a set of guidelines that a borrower and mortgage loan need to meet to be guaranteed by the government in case of default.
Foreclosure and Bankruptcy Don’t Disqualify You
Qualified VA homebuyers with history of bankruptcy, or even default on a VA loan, are still entitled to access VA loan benefits. There is no minimum credit score requirement.
Insurance isn’t Required
With most mortgages, when less than 20% of the loan is provided as down payment, borrowers are required to carry mortgage insurance. Because these are insured by the government, mortgage insurance and the premiums that come with it are no longer required or necessary.
The VA Funding Fee
These loans come with a required fee to help support the program. You can have the fee rolled into your loan amount, or if you have a service related disability, it can be waived. But it’s a small price to pay to be able to skip both down payments and insurance.
You can’t have a co-borrower that isn’t your spouse or another person independently eligible for VA loan benefits. Or you can, but then you lose your no-down-payment benefit.
There is No Prepayment Penalty
Being able to make extra payments, or pay more than required each month, can shave years and tens of thousands of dollars off your loan. This is actually a rare benefit to be offered, and can really turbo-charge your paydown.
VA Loan Interest Rates
Current VA mortgage rates average 4.66% nationally, and have changed by +0.42% over the past twelve months. That is a few tenths of a percent higher than the national average. This slightly higher rate may sound troublesome, but combined with all the remarkable benefits outlined above, it’s still a major deal.