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Understanding VA Home Loans

We outline what you need to know—including how to determine if you qualify and benefit from a VA loan

For those who served in the military, Veterans Administration (VA) home loans are a popular benefit for those looking to settle down and buy a place of their own. This is understandably so given that VA loans have very competitive interest rates and require little-to-no down payment when an individual purchases a new home, among other benefits. This mortgage option offers veterans and those still in active service an opportunity to own their dream home, even when they believe it to be out of reach financially. If you believe you qualify for this type of home loan, there are a few key considerations to get the most out of this opportunity.

Determine Your Eligibility

As the name suggests, VA home loans are for those who have served, or currently serve, in the U.S. military, but the requirements vary depending on whether you are a veteran or are currently serving on active duty. There are some general guidelines to determine whether or not you qualify:

  • Current, active-duty members are eligible after 90 days of service
  • Veterans who served after Aug. 2, 1990, are eligible if they served for 24 months
  • Guard members and reservists are eligible after 90 days of active service or six years of Guard and Reserve service
  • Military academy cadets are also eligible, as are spouses, in special instances

Advantages of a VA Home Loan

Saving enough money for a down payment is often a huge barrier when it comes to taking the plunge into home ownership. For those who qualify for a VA home loan, however, the need for a down payment is eliminated or greatly reduced. But that doesn’t mean there is no money required “out of pocket” during a home sale. Even with this type of home loan, closing costs, which can sometimes be limited, as well as earnest money, are still required. Both costs that are due at purchase can fluctuate depending on the price of the new place.

Additionally, the financial requirements for a VA home loan tend to be more attainable than a more conventional loan. While the required credit-score range for most loans is somewhere between 650 and 700, a VA loan is much lower at around 620 for an applicant to qualify. On top of that, the required debt-to-ratio for these types of loans are more lenient, meaning that someone with less-than-perfect credit and some debt can still qualify for a VA loan.

For many traditional home buyers who put less than a 20% down payment for their mortgage, they are required to pay private mortgage insurance every single month, generally costing around $200. If you have VA home loan, however, it waives this insurance requirement and can cut down monthly expenses.

If you believe you are eligible for a VA home loan but want to learn more about the process of buying a home, connect with the experienced attorneys at ALA, who are well-versed in buyers’ unique needs.

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