Considering a VA Home Purchase Loan? Here’s What You Need to Know.

A VA Home Purchase Loan (or just VA Loan for short) is a mortgage loan that is guaranteed by the U.S. Department of Veteran’s Affairs. VA loans are specifically designed to help military personnel purchase real estate. They are available to most active service men and women, veterans and eligible surviving spouses.

If you fall into one of these categories, you will definitely want to consider a VA loan when buying a home. Whether it’s your first home or you are ready to move up, a VA home purchase loan will give you many advantages that just aren’t available to traditional mortgage borrowers. You have served your country with honor and bravery, and VA loans can help you better afford the American Dream of homeownership.

How VA Home Purchase Loans Work

VA loans are done through private mortgage lenders. At Moreira Team we service many VA home purchase loans. Because the VA guarantees a portion of the loan, the lender is able to provide you with more favorable home loan terms. We’re talking about low down payments (zero down in some instances), competitive interest rates and no need for private mortgage insurance (PMI or MIP, which would have to be paid on other loan programs like FHA loans).

Here are more details about those 3 key advantages of a VA loan:

  1. No Down Payment—Most VA loans can be financed for up to 100% of the purchase price. Traditional mortgages will generally require at least 20%. FHA loans usually require 3-10% minimum. Not everyone has set aside this much cash, especially if you’re in the military right now. If you can afford to put some money down, the better terms you will get. Just because you don’t have to make a down payment doesn’t mean you should put down 0% if you can afford more.
  2. No Monthly Mortgage Insurance—Private mortgage insurance can add 5-10% of the total mortgage cost if you put down less than 20% in an FHA loan. You have to pay monthly non-refundable insurance premiums until you have paid off at least 20% of the purchase price. This obviously adds up for FHA borrowers, but doesn’t impact VA borrowers who do not have to pay PMI!
  3. Favorable Interest Rates—In general, VA loan interest rates are extremely competitive compared to traditional mortgage rates. As you might expect, lower rates mean less total interest you will have to pay over the life of your home loan. This can save you a ton of money over time.

VA Loan Eligibility

To be eligible for a VA home purchase loan, you must meet certain requirements. We’ll cover some of the basics below, but you may also want to download our VA Home Loan eBook for even more detailed information about eligibility requirements.

  • Length of Service/Duty Status—These factors could impact your eligibility for a VA loan and other specific VA benefits. You must have a DD214 as proof of your military service (whether current, retired, honorably discharged or Guard/Reserve status).
  • Primary Residence—VA loans must be applied toward your primary residence home purchase. They are not meant for second homes or investment properties.
  • Credit Score—Like any mortgage loan, you will need a solid credit rating to qualify (usually 640+ for VA loans). However, you will have more options as a VA borrower than if you are trying to qualify for a traditional home loan.
  • Income—Most active duty service members can show sufficient income requirements based on standard military compensation. Veterans and eligible surviving spouses will need to demonstrate current employment status and reasonable income to qualify.
  • Certificate of Eligibility (COE)—This is issued to a veteran who has been honorably discharged and must be provided to the lender and VA in order to qualify for VA home loan benefits.

Before you apply for a VA home purchase loan, you will want to have all your paperwork in order. This includes bank statements, COE, DD214, employment documents and more. Be sure and ask your certified VA mortgage advisor for all necessary recommendations so you can be prepared as possible. This will make the mortgage loan application process go smoother.

To learn more about VA home loans or to get started on your VA loan application toward the purchase of your new home, contact us today!