What Are VA Loans?

Posted by Matthew Lahti on Sunday, June 16th, 2013 at 12:14pm

VA loans are one of the military benefits offered to both retired and active service members. Typically, obtaining one of these loans involves a simple process of application and acceptance. The necessary paperwork must be in order, but beyond that, the process is quite streamlined.

The applicant applies for pre-qualification that validates the individual’s seriousness about purchasing a home. Once he is pre-qualified, he will receive a certificate of eligibility. Not only does this allow the service member to have a price range to search in, but also, it provides a sense of commitment in purchasing a home to the potential seller.

Service members can obtain a VA loan with reasonable terms in order to purchase a home. Instead of going to a mainstream lender where all types of individuals compete with each other for mortgages, service members have access to a supply of money that is designed for the military only.

One of the primary benefits for some individuals is that VA loans do not take into consideration an individual’s credit score. Instead, a look is taken at the ratio between the individual’s debt and income. As long as the ratio is reasonable, the service member will have no difficulty obtaining a loan with reasonable terms.

Another one of the benefits of a VA loan is that it eliminates the requirement of placing a down payment on the home. This is an exceptional benefit, especially in times of a recession when money is tight and difficult to come by. Since a down payment is not required on the purchase of the home, PMI or private mortgage insurance is also avoided. This avoidance will help to keep the monthly payment more reasonable or less costly.

Additionally, in some cases, the contract is arranged in such a manner that the service member can also avoid closing costs on the loan. The closing costs are integrated into the loan itself, eliminating the need to come up with additional money at the closing of the loan.

Plus, VA loans bring with them a fixed rate of interest that is comparable to the fixed rate of interest attached to the conventional mortgages offered to the general public. At the very least, the offered interest rates are much better than the rates typically offered on other types of loans.

Another benefit of VA loans is the fact that all of these factors put together allow the service member to purchase a more expensive home than he would have been able to do with a conventional loan. Alternatively, these factors help to generate a more affordable monthly payment.

A one time fee is charged at the origination of the loan. This fee is integrated into the loan itself and therefore, the money does not need to be readily available.

VA loans also bring with them guaranteed assistance for any service member who begins to experience difficulty meeting his monthly financial obligation. Counseling is available to assist with financial strategies.

A few requirements have been set in place when it comes to obtaining a VA loan. In particular, the individual must have served a minimum of 90 active duty days during times of war. During times of peace, the individual must have served a minimum of 181 continuous active duty days. A dishonorable discharge would prevent the service member from qualifying for one of the VA loans.

Intro Blurb: Military service members can take advantage of the opportunity to use a VA loan to purchase a home. The requirements are minimal and the savings are great. Find out more here.

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