What is a VA Loan?

Purchasing a home is a significant milestone, especially for first time home buyers. While there are multiple options available for home financing and buying a home, if you are a veteran, then a VA Loan might be an option to really consider. What is a VA Loan, exactly? Let’s dive in and go over the benefits, potential drawbacks, and eligibility requirements.

What is a VA Loan?

A VA Loan, or Veterans Affairs Loan, is a type of home mortgage offered in the United States, backed by the Department of Veterans Affairs. Designed primarily for veterans, active-duty service members, and select military spouses, this loan can provide several advantages over a conventional loan. The VA Loan's main attraction is its favorable terms, which can often be hard to match with other loan types.

Pros and Cons of a VA Loan

Like any home loan, there are options that need to be considered when selecting one that is right for you. While a VA loan may be exclusively offered to Veterans, there may still be better options. That said, here are some of the pros and cons of a VA loan.

Pros of a VA Loan:

No Down Payment Required:

One of the biggest advantages of a VA Loan is the possibility of purchasing a home with no money down. This can be especially beneficial for those who have served their country and might not have the necessary funds for a down payment. Learn more about buying a home with no money down.

Competitive VA Loan Interest Rates:

VA Loans typically offer interest rates that are lower than those of conventional loans. These rates can save homeowners significant amounts over the loan's lifespan.

No Private Mortgage Insurance (PMI):

Unlike other loan types where PMI is necessary when a down payment of less than 20% is made, VA Loans do not require PMI.

Flexibility in Qualification:

VA Loans often have more forgiving qualification standards compared to other loan types.

Cons of a VA Loan:

VA Funding Fee:

Borrowers may have to pay a VA funding fee, which can be rolled into the loan amount or paid upfront.

Limited to Primary Residences:

VA Loans can't be used to purchase or refinance vacation homes or investment properties. So if you are planning on buying that home out in the Bahamas, you’re going to have to do so through a traditional loan or getting creative with it by utilizing a HELOC.

Loan Limits:

There are limits to the amount that can be borrowed, which can vary by county. However, as of 2020, if you have full entitlement, you will not have a VA Loan limit.

Eligibility for a VA Loan

When considering a VA Loan, it's essential to understand the eligibility requirements set by the Department of Veterans Affairs. First and foremost, VA Loans are generally available to veterans, active-duty service members, and select military spouses. The specifics of eligibility include:

• Service Requirements: Different service durations are required for World War II, Korean War, Vietnam War, and peacetime veterans. The Veterans' Benefits Improvement Act has detailed these requirements.
  
  
• Certificate of Eligibility (COE): Before applying for a VA Loan, one must obtain a COE from the Department of Veterans Affairs. This certificate proves the individual's eligibility based on their service record. You can request your COE on the va.gov website housing assistance page.
  
  
• Credit and Income Requirements: Like any other loan, lenders will check credit scores and income statements to ensure the borrower's ability to repay the loan. While VA Loans might have more lenient standards, good credit and a stable income can help secure a lower interest rate.
  
  
• Spousal Status: The VA offers home loan benefits not only to veterans but also to some surviving spouses. If a spouse is eligible, they might be able to obtain a VA Loan even if they aren't veterans themselves.

Apply for a VA Loan with Valor Mortgage

If you're considering buying a home, especially if it's your first home, and you meet the VA Loan eligibility requirements, this could be an excellent opportunity for you.

Conventional loans, while popular, might not offer the same benefits as a VA Loan, especially in terms of down payment and interest rates.

If you are looking to purchase a home in Tennessee or Kentucky, we’d love to help. Valor Mortgage is here to guide you through every step, from understanding closing costs to making that final payment.

Just contact us today, and tell us in the message you are a veteran! That will give us a heads up to look out for a VA Loan option for you.