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If you are looking to buy a home and have direct military ties, you will want to explore your mortgage loan options and get the best VA mortgage rates. These home loans are backed by the U.S. Department of Veterans Affairs (VA) and offer many excellent benefits to military home buyers. They provide lower-than-average mortgage rates and zero-down-payment options that you won’t find with most other lending programs.
What is a VA Mortgage Loan?
VA home loans are available to qualifying U.S. military veterans and active-duty service members. Some surviving spouses may also qualify for this great loan program. VA mortgage loans are available to those who have served (or are serving) in the Army, Air Force, Marines, Navy, Space Force, Coast Guard and National Guard. You must meet specific service eligibility requirements in terms of time served, discharge status, and more. You will want to talk with a VA-approved mortgage lender to see if you can qualify.
How Do I Qualify for a VA Loan?
In addition to service requirements, mortgage lenders will also review your financial situation to determine loan qualification. VA loans do provide more flexible qualification requirements than other types of mortgage loans. However, they won’t just give out a loan to anyone with a military background. The loan qualification and VA mortgage pre-approval process will also determine your mortgage rate. This is the fixed percentage of interest you will be paying over the life of your mortgage loan.
How Can I Lower My VA Mortgage Rate?
VA loans do offer very competitive and relatively low mortgage rates to eligible borrowers. As a military home buyer, you will want to get your finances in order and be in the best position possible to qualify for a lower mortgage rate. Here are some of the most important steps you should be taking before you apply for a VA home loan:
Improve Your Credit Score
Your current credit rating (aka FICO score) will be a very important factor reviewed by the VA-approved mortgage lender and regional VA office. Most mortgage lenders are looking for a credit score of at least 620. However, there are some who may go as low as 580 if your other financial indicators are strong. In general, a higher credit score will equate to a lower mortgage rate and an increased chance of getting approved for a VA loan. Take the steps now to improve your credit rating.
Shop Around
It’s never a bad idea to talk with multiple VA-approved mortgage lenders. Make sure they are approved to offer VA mortgage loans. Also, ask about getting pre-approved for your VA loan rather than just a simple pre-qualification. A mortgage pre-approval will tell you much more about what you can actually afford to borrow and help you lock in a lower mortgage rate. It can also give you more negotiating power when making offers because the sellers know your financing is solid. Don’t be afraid to ask questions and understand all the important details you need to know when applying for a VA loan.
Pay Down Other Debts
If you have racked up other high-interest debts like credit cards, car loans and personal loans, you will want to reduce them as much as you can before applying for a VA home loan. Most VA mortgage lenders are looking for a debt-to-income (DTI) ratio of no more than 41%, though again there may be some flexibility based on your other qualification standards. Your DTI is calculated by taking your average total minimum monthly debt payments and dividing that by your average monthly pre-tax income. If you have too much debt, you may not qualify for a VA home loan—or any other type of home loan, for that matter.
Save Up for a Down Payment or Points
One excellent advantage of a VA mortgage loan is that you can qualify for 100% financing. That means no down payment is required. There may be some out-of-pocket closing costs to cover, but you don’t necessarily need to make a down payment. However, the more you are able to put down, the more you will be able to lower your qualified mortgage rate. Save up for a larger down payment if you want a lower fixed interest rate on your VA loan. Any amount of down payment can also reduce your mortgage interest payments.
You should also ask your mortgage lender about buying down points. This may be a better use of any cash than a down payment, especially for zero-down VA loans. You can apply cash to buy down interest points, thus lowering your fixed mortgage interest rate for the life of the loan. You may want to use all your cash for points, or split it between buying points and making a down payment. The best solution may vary from borrower to borrower and lender to lender.
If you would like to know more about VA home loans and see if you qualify for a zero-down-payment VA mortgage in the Atlanta area, contact Moreira Team | MortgageRight today.