VA Home Loan
The number of military members availing the Veterans Affairs home loan continues to grow by the day, with over 20 million and counting. This home loan program is arguably the best in terms of easy home acquisition as it calls for no down payment. One will not have to put any down payment at all in order to purchase a house using a VA loan. On top of that, no mortgage insurance is also called for. Truly, this home loan program is rare and is much coveted.
The VA loan program was established for members of the armed forces and was birthed in 1944 to help them purchase homes. In earlier years—much truer today—loan grants would be extended exclusively to individuals with high credit scores under the belief that people who “had it better in life” would be less likely to default. Anyone who didn’t have a great FICO score could not purchase a home and would have to keep renting forever. What makes the VA home loan program stand out among its contemporaries is that it pushes to the forefront the advantages of having to build home equity, with a guarantor not entirely dependent on a borrower’s credit score.
A borrower should still have a decent credit score as the loan he or she will get will still come from a private bank or lender, and not directly from the federal government. Interestingly enough, the U.S. Department of Veterans Affairs (VA) guarantees mortgages that come from these banks and mortgage lenders. The VA’s job is to guarantee the loan against a future default of the serviceman or woman. They are not in charge of letting out stacks of money, nor do they issue signed checks. This is put in place to help keep safe lending institutions.
VA Loan Requirements
Exclusive to VA loan applicants is a VA funding fee in lieu of a mortgage insurance. This fee is set by the VA for each loan. The VA funding fee for first-time VA borrower is 2.15% and can either be paid by the borrower at closing or rolled into the total loan amount. Any service member who has a service-related disability is exempt from the VA funding fee.
There are four general qualifications with only one condition needed to be considered.
- Borrower must have served 90 successive days or active service over wartime.
- Borrower must have delivered 181 days of operating service over peacetime.
- Borrower must have more than 6 years of rendered service in the National Guard or Reserves.
- Borrower must be a spouse of a military personnel who has died over war or has died as an outcome of a service-caused disability.
VA Loan Limits
The VA home loan program does not set any maximum loan amount that a borrower can get. However, the VA’s cap on the guaranty amount is $453,100 for most states in 2018. This VA guarantee cap thereby affects the total amount a lender would extend to a borrower without requiring any down payment.
Mortgage companies can extend loans to veterans in excess of the county’s maximum loan limit. Thus, lenders may require a down payment for the amount borrowed in excess of the applicable county loan limit.
The maximum loan amount of a VA loan is set by the county where a borrower is looking to purchase a home. For most counties in the U.S, the limit is more or less $453,100. In key counties considered to be costly, the ceiling is pushed much farther to $679,650.
What veterans administration lenders are stern about are the qualification requirements. The paperwork involved in acquiring a VA loan is standard for each borrower. Since the VA home loan is reserved for our servicemen and women along with their eligible surviving spouses, military people must avail of such program if they are in the market for a home. It is one way of thanking our veterans for their service.