Reaching a point in life when you can buy a home is hard work. And if you are a veteran or you serve in the army, it can be a greater challenge compared to people who are not. What options do you have if you are a veteran and want to buy a house? Well, there’s one mortgage option specifically for veterans: a VA loan. Are VA loans hard to get?
What is a VA loan?
The VA loan is a mortgage that is provided by private lenders and supported by the US Department of Veterans Affairs. He helps US veterans, active servants, and widowed military spouses to buy a home.
VA loans were introduced under the GI Bill in 1944, but they have become increasingly popular in recent years. In the first quarter of 2019, 8% of home purchases were made with a VA loan. This type of loan is an attractive option because it is easy to qualify and requires no down payment.
Benefits of a VA home loan
Let’s take a look at some of these benefits now and recall once again how VA home loans are really beneficial. This is an advantage that civilians do not enjoy and it is actually an allowance.
The most obvious benefit is the lack of money option. The veteran does not require any advance payment unless the loan exceeds the maximum guidelines of the lender VA. Most loans are limited by VA lenders at USD 417,000, which is higher in some areas considered “high costs”.
Everyone who buys a home knows how difficult it is to save enough funds for an advance payment and closing costs. Even FHA loans, which require a down payment of 3.5 percent, can still be challenging, especially for first-time home buyers who save and save on buying their first home. Zero down is a huge plus.
What are the requirements for guaranteeing VA loans?
Each lender has its own criteria for deciding who is the “good risk” for a mortgage. However, there are a few basic things to keep in mind:
- Borrowers must demonstrate that they have income to pay back the mortgage.
- They should not have large debts.
- Although there is no minimum creditworthiness assessment requirement, borrowers may have difficulty obtaining approval from the lender if they do not have at least 620 FICO points.
It is also possible to use housing loan benefits after bankruptcy, as long as sufficient time has elapsed.
What are VA permissions and why are they so important?
The key feature of VA loans is entitlement. VA loan entitlement is essentially the loan amount VA guarantees to the lender in the event of default.
There are two types of permissions:
- Basic entitlement: less than 25 percent of the total mortgage or USD 36,000.
- Premium entitlement: up to 25 percent of the Federal Housing Credit (FHFA) credit limit, minus the basic entitlement.
For those who need to buy a house that costs over $ 144,000, you can use the bonus entitlement. For example, in most US counties, the FHFA-compliant loan limit in 2020 is $ 510,400. In this case, 25 percent of the loan amount would be USD 127,600. However, if you have total entitlement, you must subtract the basic entitlements, leaving you $ 91,600 as a bonus for entitlements.