These are special loans made by private lenders such as banks or mortgage companies and are designed specifically for veterans in mind. These work toward bringing the military families into homeownership and provide a house their family can live in for years to come.
Guaranteed VA Home Loans are protected against loss if you or a later owner fails to repay the loan, which replaces the protection lenders normally have through a down payment. If you are looking to purchase a permanent home in the United States, these kinds of loans will give you the best interest rates on the market.
Basic and Bonus Entitlements
Since VA Home Loans are partially backed by Veterans Affairs, they will offer a “basic entitlement” of $36,000 that you will have access to regardless of other lenders. I will provide up to four times that amount in my loan offers, which means servicemen and women can earn up to $144,000 under that status to attain homeownership fast.
In addition, Veterans Affairs may decide to add funds to your VA Home Loan due to market inflation that caps at $68,250. Even if other lenders decide not to present any home mortgages to you, $104,250 is available to you due to your faithful service to your country.
Benefits of a VA Home Loan
If you were or are still serving as a member of the armed forces and are looking for the best home buying options for your family, a VA Home Loan is an excellent choice. Not only were these mortgages made for veterans like you mind who are pursuing homeownership, but they also provide numerous benefits such as:
- No down payment
- Negotiable interest rate
- Buyer informed of reasonable value
- Closing costs are comparable with other financing types (and maybe lower)
- Right to prepay without penalty
- No mortgage insurance premiums
- Veterans Affairs assistance to military borrowers due to temporary financial difficult
Getting the Best VA Home Loan Rates
I have seen many veterans get excited about VA Home Loans and immediately come to me for getting one without considering any of the drawbacks. Because there is no down payment, has lower income level requirements, and does not require a high credit score, VA Home Loans are known for higher interest rates.
With all the incredible benefits that result from VA Home Loans, I truly believe it is the best mortgage option on the market for active or past military families. Let me show you how you can take advantage of the Veterans Affairs system and learn how to drop your initial interest rate.
1). Increase your credit
While you are only required to get a credit score of at least 620 to obtain a VA Home Loan, you are meeting the bare minimum at that point. You will be charged with an increased interest rate since lenders have to account for the risk involved in their investment.
My personal recommendation is to get 720 or higher on your credit score before you approach a lender, especially if you have a co-signer who also has excellent credit.
2). Down Payment
Veterans Affairs, when approving your VA Home Loan, will do so in most cases with zero percent down, which is unlike traditional mortgages. Military families are excited they have additional funds to spend on the house but do not realize that money will eventually go back into the higher interest rates carried by the loan.
To acquire the lowest interest rate and fee structure possible, I tell my veteran clients to put down 20%, which will reduce the initial principal balance and payments later on.
3). Income Thresholds
Unlike traditional mortgages that demand impossible income thresholds for veterans to meet, VA Home Loans are more flexible with your current financial needs. Most lenders look for military families with Debt-To-Income ratios of less than 41%, although this will not prevent them from investing in your dream home.
To obtain homeownership with the best deal possible, I suggest for your family consider purchasing an affordable home so lenders will have less risk on the front end and you can secure a decreased interest rate.