Everything to Know About a VA Loan: Benefits, Tips and More

Last week we did a deep dive into FHA loans. Today, we’re covering everything to know about an VA loan. For military service members and veterans, VA loans offer a unique pathway to homeownership, often with zero down payment and competitive rates. Let’s look at VA loan basics, eligibility and benefits.

What Is a VA Loan?

A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs for veterans, active duty service members and certain military spouses. VA loans provide attractive terms, like no down payment or private mortgage insurance, making them a top choice for those who qualify.

Key Requirements

• Eligibility: To qualify, you must be a current or former service member, or an eligible spouse, with a Certificate of Eligibility (COE).
• Credit and Income: Though VA loans have no set minimum credit score, lenders generally prefer a score of 620 or higher.
• Debt-to-Income Ratio (DTI): VA loans are typically more lenient with DTIs, often allowing up to 50%.
• VA Funding Fee: A one-time funding fee is required, though veterans with disabilities or certain other groups are exempt.

Pros and Cons of VA Loans

Pros:

• No Down Payment Required: VA loans allow qualified borrowers to finance 100% of the home’s value.
• No PMI: Borrowers avoid private mortgage insurance, which lowers monthly payments.
• Competitive Interest Rates: VA loans often feature lower interest rates than conventional loans.

Cons:

• Funding Fee: Most borrowers pay a one-time funding fee.
• Primary Residences Only: VA loans can only be used for primary homes, so they aren’t suitable for investment properties.

Ideal Candidates for VA Loans

VA loans are ideal for service members and veterans looking for affordable home financing options with minimal upfront costs. Eligible spouses of deceased service members may also qualify.

Application Process

1. Obtain COE: Start by obtaining your Certificate of Eligibility (COE) to confirm your status with the VA.
2. Pre-Approval: Get pre-approved with a lender specializing in VA loans.
3. VA Appraisal & Underwriting: VA requires an appraisal to ensure the property meets standards.
4. Closing: Complete the loan closing to finalize your VA mortgage.

For those eligible, VA loans are an exceptional option with no down payment and low-interest rates. Contact a VA-approved lender (our KC preferred vendor is Meggan McDonald with Supreme Lending) to start exploring your options and learn how to take advantage of this powerful benefit.

We hope this blog series covering the three main types of home loans has been helpful and informative! Remember, you can always reach out to your realtor to help you walk through the option that is best for you.