VA Loans: A Smart Choice For Most Veterans

VA Loans: A Smart Choice For Most Veterans

If you’ve served in the military or you’re currently on active duty and you’re interested in buying a home, a V.A. mortgage could be a great option for you. In a VA loan, a portion of the loan is underwritten – or guaranteed – by the U.S. Department of Veterans Affairs, which means lenders who write mortgages under the VA program assume less risk than they would under a conventional mortgage.

Home buyers who qualify for a VA loan can buy their primary home with no down payment as long as the cost of the home is less than the home’s appraised value. And, although the actual entitlement is capped at $144,000, or roughly 25% of conforming loan limits, when the cost of the home exceeds the entitlement limit but still falls within the conforming limits (the current upper limit for a conforming loan is $625,000), VA borrowers may still be able to buy the home using the entitlement AND with no down payment.

So what are the advantages of the VA Home Loan program?

  • Obviously, no down payment is a huge advantage to many buyers.
  • The VA allows the seller to pay closing costs, which can mean big savings for the buyer; in fact, when the seller is willing to pay closing costs, the buyer can walk way without having to put a single penny down.
  • VA loans are not limited to first-time homebuyers, meaning veterans can use this benefit over and over again.
  • Buyers do not need to pay private mortgage insurance.
  • The loans are usually assumable by another qualified veteran, which can be a boon when it’s time to sell.

The biggest disadvantage of the VA mortgage program: If you aren’t a veteran or involved in active duty, you’re not eligible. Other disadvantages:

  • If you didn’t receive an honorable discharge, you’re probably not eligible, but you can appeal. Medical and general discharges are usually approved, and even those dishonorably discharged may be able to have the terms of their discharge changed on appeal.
  • You need to have a decent credit score to qualify (the specific requirements change considerably over time; your lender will know what type of credit score you need).
  • You’ll need to submit a certificate of eligibility (COE); sometimes proving eligibility can be time-consuming, so plan to get your certificate early in your home search.

Although your circumstances can certainly vary, for most veterans and active-duty service members, the VA loan program is a great choice for a mortgage. Take a look at your finances, talk with your lender, and if you decide it’s right for you, don’t forget to apply early for your COE.