If you've been exploring home financing options available to first time home buyers, you may have taken notice of offers of VA loans. These are loans backed by the government that are given to people who've served in the military, their spouses, and certain qualified family members. Let's take a look at whether they represent a good alternative for you when compared to other kinds of mortgages.
Qualifying
Those who've served in a branch of the military for 90 days during wartime or 180 days during peacetime are qualified for VA loans. Serving 6 years in the reserves also qualifies a borrower to take out a VA-backed loan. They also may extend this privilege to their spouses, although partners might have to file some additional paperwork to invoke this privilege if the qualified spouse is currently deployed.
Financial institutions do still have the right to assess credit worthiness just like they would with other sorts of mortgages. No one is giving away a free house, but these kinds of loans are a good way for first-timers to get their feet in the door without having to jump through as many hoops.
What's Special About VA Loans?
A major upside of a loan from the VA is that you won't have to put any money down. Likewise, you won't have to put up home insurance, an additional cost that frequently catches cash-poor first time home buyers off guard.
Your loan can be combined with other kinds of financing, too. If you find a house that exceeds the limits of the program, let the loan officer at the bank know what your situation is so they can help you work something out. Be aware that additional qualifying requirements associated with more standards loans are likely to apply if you go this route.
Limits
The limitations applied to loans will vary based on the average cost of a house in the area where you are buying. Nationally, most loans are limited at around $480,000 for 2019. This number may go higher in high-cost regions, such as Northern Virginia, for example.
Funding fees also apply. Members of the armed forces can obtain loans for 2.15% of the loan amount. If you make a down payment of 10% or more, you will see this amount reduced to 1.25%. Reservists and National Guard members usually will pay around 0.25 basis points more on the funding fees for their loans.
Share9 September 2019
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