Are you a veteran planning to buy your first home? If so, you may be wondering about the advantages of a VA home loan compared to a conventional loan.
As a veteran, you’re entitled to a VA loan as long as you meet the eligibility requirements laid out by the Department of Veterans Affairs. But if you’re new to buying a home, you might not be aware of the benefits this type of loan has to offer.
Our team at Your Home Sold Guaranteed Realty - Reeds Real Estate is veteran-owned and operated. This means we specialize in helping veteran home buyers understand the ins and outs of the buying process. In this article, we’ll break down the top five benefits of VA home loans. That way, you can decide on the best loan product for you.
What Are The Advantages of a VA Home Loan?
No Down Payment
First, one of the most significant advantages of a VA home loan is that they don’t require a down payment. This is a huge benefit for veteran home buyers who are concerned about their ability to save up enough money to afford a down payment.
On average, down payments using a conventional home loan range between five to ten percent of the home’s sale price. Some home buyers, particularly repeat buyers, spend closer to 20%.
Even Federal Housing Administration (FHA) loans still require a down payment of 3.5% minimum.
The exact down payment amount depends on the home’s sale price and the lender’s requirements. But with a VA home loan, you don’t have to worry. You can purchase any qualifying home without worrying about saving up enough money.
No Mortgage Insurance
Conventional loan borrowers typically need to make a down payment of 20% to avoid paying private mortgage insurance (PMI). PMI is meant to protect lenders from defaults.
Borrowers who can’t meet this 20% threshold are required to pay PMI, which adds anywhere from 0.5% to two percent additional cost on top of monthly mortgage payments. Even FHA loans require mortgage insurance.
But with a VA home loan, you don’t have to worry about this additional cost. This allows you to put more money towards your home and other expenses.
Lower Credit Requirements
VA home loans are easier to qualify for financially compared to many conventional loans. First, the VA itself doesn’t impose any credit score requirements.
Instead, qualifying credit scores are determined by individual lenders. For VA borrowers, minimum credit scores can range from 580 to 660.
The VA does define a debt-to-income ratio limit– it allows for no more than 41%. However, qualifying for a VA home loan is still possible if you have a higher debt-to-income ratio. For example, if you can prove you have enough residual income.
Either way, be sure to check with your lender to see what their requirements are.
No Loan Limits For VA Entitlement
VA entitlement refers to how much the VA will cover in the event you default on your loan. While there used to be loan limits in place for all VA borrowers, this is no longer the case. Now, the VA will repay your lender up to 25% of the loan amount as long as you qualify for full entitlement.
There are a few ways to get full entitlement:
- If you’ve never used your home loan benefit
- If you’ve sold a property and paid off its VA loan in full
- If you’ve experienced a foreclosure or compromise claim that caused you to repay your VA loan in full
If you don’t have full entitlement, the amount the VA pays is based on your county’s loan limit.
Can Be Used Multiple Times
You’re entitled to the benefits of VA loans for life. This means you can use a VA home loan whenever you purchase a new home. In addition, you can even take out multiple VA loans at the same time as long as you have enough remaining entitlement.
Keep in mind that VA loans can only be used for primary residences. However, this doesn’t prevent you from renting out the first home and living in the second one, as long as you meet the VA’s occupancy requirements.
Be sure to check with your lender or a realtor who specializes in veteran home buyers if you’re interested in buying a second primary residence with a VA loan.
Buy a Home With Our Realtors in Chesapeake, VA
If in the market for a new home, you’ll need a realtor knowledgeable about the advantages of a VA home loan. VA loans affect the closing process differently than conventional loans, so having an experienced realtor on your side is important.
At Your Home Sold Guaranteed Realty - Reeds Real Estate, we’ve served veteran home buyers in the Chesapeake area for years. In fact, our real estate business is veteran-owned and operated. This means we have first-hand experience to help buyers navigate the market successfully.
On top of our experience, we also offer several buyer guarantees that make buying a home with us risk-free. This includes our Buy It Back Guarantee, which ensures you’ll be satisfied with your new home. If not, our team will buy it back from you.
To learn more about our guarantees or what it’s like working with our team, give us a call at (757) 799-4824. You can also fill out the form below.
