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VA home loans help active service members, veterans of the armed forces, and eligible family members, including surviving spouses, become homeowners. The VA (the Department of Veterans Affairs) does not offer mortgages directly but rather guarantees the loans are issued through private lenders.
VA loans are available to current service members and, in some cases, their spouses:
To obtain a VA loan, borrowers must present a VA certificate of eligibility (COE).
The COVID-19 pandemic has impacted the home buying process in 2020 in several ways.
Private lenders offer VA loans with the backing of a VA guarantee. That said, all lenders are not the same; some may be better than others for your situation. You will need to do your homework to find the best VA lender for your situation.
Different lenders may be best for borrowers with different situations or offer some specific benefits. Some lenders may be better for borrowers in certain conditions or offer a better experience for some borrowers. This might include:
As with any type of loan, you will want to know:
Overall, are VA loans a focus and priority of the lender? Do they seem to welcome borrowers looking for VA loans?
While VA loans don’t require private mortgage insurance, if you put less than 20% down, you will need to pay a VA funding fee. This fee is a percentage of the amount borrowed and will vary based upon:
Additionally, your lender might charge for things like a credit check, VA appraisal fees, and any discount points you decide to pay on the mortgage, insurance, and other closing costs. This will vary by lender in some cases these costs can be rolled into the loan.
To apply for a VA loan, you will need to apply for a certificate of eligibility. There may be forms to complete, and active veterans will need a statement of service. Requirements may vary a bit for surviving spouses, National Guard, or Reservists.
You will also need to prove that you will be living in the home you are trying to finance through a VA loan. These loans cannot be used to finance investment property.
The VA does not have a minimum credit score requirement. However, the private lenders through whom the loan will be made might have their own minimums. Borrowers with a credit score lower than 620 will want to look for a lender who will still make the loan and from whom that can still get a decent interest with a lower credit score.
If the active military or veteran is legally married, then their spouse can co-sign the loan. Two unmarried military members can also co-sign together with no adverse ramifications. A military member can also bring an unrelated non-military co-signer with one caveat. The VA guarantee on the loan is limited to the amount of the military member or veteran’s interest in the property. Note that not all lenders will allow this type of arrangement at all.
The rules prohibit the use of a VA loan to finance the purchase of an investment property. You also may not use a VA loan to finance a vacation home.
Borrowers who are still active military members, active in the National Guard, or active reservists can still qualify for a VA loan.
A VA loan can be a good alternative for those who qualify. Eligible borrowers should consider going this route, especially if their financial profile is less than stellar.