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How VA Loans Benefit Veterans and Their Families

American flag and money.  Cash for VA loan from the US Department of Veterans Affairs.
VA loans require no down payment, have limited closing costs, and come with competitive interest rates.

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After two years of historically low mortgage rates that sparked a home buying frenzy, the hike in the fed funds rate is reversing the trend. In mid-September, the average 30-year fixed mortgage rate hit 6% for the first time since 2008, up from 3.22% nine months earlier. The drop in purchasing power causes many buyers to interrupt their home searches. However, there is downward pressure on house prices and inventory is adequate.

If you are currently shopping for your next home and want to find the most affordable way to finance it, VA loans are known for their very competitive interest rates. It’s simple to check rates and get started.

Here’s what you need to know about this unique financial opportunity.

What is a VA loan?

In 1944, the United States Department of Veterans Affairs (VA) created the VA loan program to help veterans, service members, and surviving spouses more easily afford the purchase of a home. As a result, VA home loans now exist with 100% financing, competitive interest rateslimit closing costsand no private mortgage insurance (PMI) requirement.

How does a VA loan work?

VA loans are provided by private lenders like banks, credit unions, and mortgage companies. Lenders must follow VA loan program guidelines, but can set their own underwriting rules. So, as a borrower, you will need to be eligible for VA and be approved by a private lender.

After approval, the lender will fund your VA loan, you can buy a home, and your monthly payments will begin. However, if you default for any reason, the VA is required to repay your debt (up to a certain percentage). With this collateral, lenders face limited risk when issuing VA loans, allowing them to offer competitive rates and terms.

If you think it would be beneficial to take out a VA loan, act today. Start by checking the rate to which you are entitled. Representatives are available 24 hours a day to assist you.

Who can benefit from a VA loan?

VA loans can benefit anyone who qualifies with their cost-saving features.

They will be especially helpful for those who need low upfront costs to make home ownership a reality. With a VA loan, you won’t have to make a down payment, you can skip the PMI, and you can incorporate finance charges into your monthly payments.

Additionally, VA loans can be helpful if you are having difficulty getting approved for other programs because of your credit or income situation. Lenders are often more lenient with the VA guarantee.

How do you qualify for a VA loan?

Before you can qualify for a VA loan, you will need to obtain a Certificate of Eligibility (COE) from the VA. Here’s what it takes.

Minimum active service

The VA requires that you have served a minimum amount of time on active duty. The time required will depend on when you served, your type of service and your current status. For example, if you are a veteran who served in wartime, you must have served at least 90 days on active duty.

Note that eligible service members include members of the Air Force, Army, Coast Guard, Navy, Marine Corps, National Guard, Reserves, Commissioned Corps of Public Health Services and the Commissioned Corps of the National Oceanic and Atmospheric Administration.

Acceptability of Your Release

If you are not currently an active service member, the character of your release must have been on “other than dishonorable” terms (e.g., general, sub-honorable, or honorable).

Surviving spouse

Additionally, spouses of veterans may be eligible for a COE under certain circumstances, such as if the veteran died in service or from a service-related disability and the spouse has not remarried.

You can find detailed COE requirements online. Additionally, if you are ineligible for any reason, you can contact the VA to request further consideration.

Once you have a COE, you submit it to your lender and continue with the VA loan application process. The next step will be for the lender to assess your credit, Income and overall eligibility based on its internal criteria.

How much does a VA loan cost?

VA loans have favorable terms compared to many other types of mortgages. However, they still come with various costs. Here’s what you can expect:

  • VA financing fees: The VA charges financing fees ranging from 0.5% to 3.6% of your loan amount. The percentage you’ll be charged will depend on the type of VA loan you get, whether you’ve used the VA program before, and how much your down payment is. The good news? You can choose to pay the finance charge up front or finance it with your loan.
  • Closing costs: Closing costs vary by lender, but often include loan origination fees, VA appraisal fees, property taxes, hazard insurance, state and local taxes, title insurance, fees recording and more. These are due at the closing of your loan.
  • Interest: The rate assigned to you by your lender will determine how much you will pay over the life of the loan in interest charges.

Overall, your costs will vary depending on your lender, the interest rates you get, and your loan amount. To better understand what to expect, when applying, you can ask for a loan estimate that lists all of your costs.

Talk to a lender today and get started!