Mortgages dedicated to Veterans and Military Service Members
A VA loan is issued by a financial lender such as a bank, credit union, or mortgage provider and backed by the federal government – not issued through the Department of Veterans Affairs (VA) itself. However, thanks to these home loans’ federal backing, they pose less risk to lenders and require less upfront investment by potential borrowers.
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More Information on VA Loans
Like with many government-backed loans, the government guarantees a lender that it will recover some – if not all – of its losses in the unfortunate event that the homeowner stops making payments and the home winds up going into foreclosure. This typically allows financial lenders to provide applicants loans under more favorable terms than with conventional or FHA loan programs.
Offering a significant source of financial aid to veterans and service members, VA loans aren’t just easier to qualify for than loans provided through other programs. They can also be used to finance home upgrades and renovations or even cash out the equity that you possess in your home. VA loans also use a different formula when calculating an applicant’s debt-to-income (DTI) ratio, which can help qualifying borrowers afford larger homes or homes with more amenities.
Compared with other types of mortgages, there is no VA loan down payment, and VA loans don’t come with credit score requirements attached. Note that there are several VA loans, each with benefits and disadvantages. If eligible to obtain one, you’ll be allowed to apply for a VA loan through a qualified lender of your individual choice and preference.
Who Qualifies for a VA Loan?
To obtain a VA loan, you must meet certain minimum criteria. To qualify, you must be one of the following:
- An active duty member of the military or a veteran who meets specific minimum length-of-service requirements
- A surviving spouse of a military service member who died while on active duty
- An active duty military member or veteran with a disability connected to their service
Keep in mind that you need to be able to meet your chosen lender’s individual credit and income requirements. Minimums are set by the lender, not the VA itself. Also, the property you intend to purchase with the VA loan must be your primary residence, not a vacation or investment home.
To obtain a VA loan, you’ll need to receive a VA certificate of eligibility (COE) which verifies your status as a qualifying service member or surviving spouse, which can be procured from the Veterans Administration. There may be other VA requirements for surviving spouses, as well.
Not all properties are eligible to receive a VA loan either – a VA-approved appraiser will need to ensure that the home adheres to the VA’s minimum property requirements and that its value aligns with current government-issued guidelines. As a non-conforming loan, a VA mortgage would also not be subject to traditional Fannie Mae and Freddie Mac purchasing standards
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