VA loans offer those who have served one of the most flexible and powerful home lending products on the market. Created expressly for veterans and active-duty service members, VA loans come with an array of significant financial benefits that have helped more than 18 million become homeowners since 1944.
Qualified borrowers can purchase a home with no money down and no private mortgage insurance. VA loans also come with increasingly competitive rates when compared to conventional loans, which military buyers often struggle to obtain. In fact, about 80 percent of VA buyers could not have qualified for a conventional loan.
VA’s Exceptional Rates
VA loans can provide excellent rates because of their unique guarantee. The Department of Veterans Affairs guarantees about a quarter of each loan in the unlikely event the veteran defaults. That guarantee gives VA-approved lenders a greater degree of confidence to lend to military buyers. In turn, those lenders can offer qualified borrowers competitive rates and loan terms.
Even a slightly lower rate can save borrowers a great deal of money over the life of a 20- or 30-year mortgage. For example, on a 30-year mortgage for a $200,000 purchase, the difference between a 6.5 percent rate and a 6 percent rate is about $23,000 over the life of the loan.
That’s a healthy chunk of change that veterans can funnel into other important needs.
Qualifying for a VA Loan
VA loans are typically easier to qualify for than conventional loans. There are no income or credit requirements to participate in the program, although VA-approved lenders will typically look for a credit score of at least 620.
VA loans also allow for a higher debt-to-income ratio than most other loan programs. Even borrowers with a history of bankruptcy or foreclosure may still be able to qualify for a VA loan. To be eligible, applicants must be:
- Military members who’ve served 181 days on active duty or three months during war time may be eligible.
- People who have spent at least a half-dozen years in the National Guard or Reserves
- Spouses of those killed in the line of duty
Those who meet those initial guidelines must submit a Certificate of Eligibility and proof of service to the VA. Companies that specialize in VA loans can file those documents for most borrowers and help streamline the process.
