VA Loans Are The Clear Choice For Military Home Buyers
Veterans are embracing the VA home loan.
According to a recent study by the National Association of REALTORS® (NAR), active-duty military members use zero-down financing seven times more often than non-military home buyers.
Most home buyers put something down. For instance, FHA loans require 3.5 percent down, and emerging conventional loans require just 3 percent. But VA loans require zero downpayment.
This is probably why seven-in-10 active duty service persons and five-in-ten veterans use a VA loan to finance their home purchase.
VA loan advantages are hard to pass up.
Along with no downpayment requirement, the program is lenient about credit scores. And mortgage insurance is never required.
With today’s low rates and easier financing terms, veterans and active service persons are taking advantage of this benefit like few times in history.
What Are The Top VA Loan Advantages?
The VA Loan program comes with a number of advantages that set it apart from any other loan type.
VA applicants can qualify with lower credit scores, for one. Some lenders today offer VA loans down to a 580 credit score.
VA loans also adhere to less stringent debt-to-income requirements. This means applicants can qualify for more house with less income.
Applicants enjoy lower VA loan rates. According to a recent survey by loan software company Ellie Mae, veterans enjoyed rates that were 0.28% lower than rates for conventional loans. This is a difference of about $17 per month, per $100,000 borrowed.
The bigger monthly savings, however, may come from the fact that VA borrowers pay no mortgage insurance. This expense is typically required on any other loan type when the applicant puts down less than 20 percent.
But VA loans eliminate this cost, which can total hundreds of dollars per month.
By far the most significant advantage is the ability to buy without making a downpayment.
Under the program, eligible veterans and active military can borrow as much as they need with nothing down, provided they qualify for the loan based on credit and income standards.
VA Loans never require a downpayment, and approximately 90% of VA borrowers do not make one at all.
Very few VA borrowers say that saving up for the downpayment was the hardest part of buying a home.
In fact, about three times as many people who finance home purchases by other means said saving up the downpayment was the most difficult part of the entire process. Military home buyers skip that concern almost completely.
Where Did VA Loans Come From?
The VA Loan program started off in 1944 as a way to help World War II veterans buy their own homes. More than seven decades later, it is still on mission, providing the same service to the country’s military members.
Since its inception, the program has guaranteed more than 22 million home loans, worth more than $1.7 trillion.
And it’s increasingly popular. In 2015 alone, the VA guaranteed more than 631,000 loans, valued at more than $153 billion.
The VA loan “guarantee” doesn’t mean that applicants are guaranteed to receive approval. Rather, it means VA backs the loans so that lenders can offer better terms to veterans.
Other than having access to VA Loans, veterans and active-service military are much like other home buyers.
More than 20 million Americans have served in the military in some fashion, according to the Department of Veterans Affairs. And they come from all walks of life, live in all parts of the country and may be of any age, from teen to centenarian.
People eligible for VA Loans may have served in any period, from World War II to the Iraq and Afghanistan conflicts. According to VA guidelines, eligible borrowers may have been in the Army, Navy, Air Force, Marines, Coast Guard — including the National Guard or Reserves.
Service requirements vary, but generally follow these basic guidelines:
- 90 days of service during wartime
- 181 days of service during peacetime
- 6 years in the National Guard or Reserves
Requirements for the minimum service are not set in stone.
For instance, former military members who were discharged due to hardship, certain medical conditions, service-connected disability or a force reduction may be exempt from the length-of-service requirements.
VA encourages borrowers who think they might be eligible to apply for a VA Certificate of Eligibility or COE. This can be done online at no cost or by a VA-approved lender.
How VA Loans Benefit Veterans
Most other major loan programs, including Federal Housing Administration (FHA) and conventional loans, require downpayments. FHA requires at least 3.5 percent and conventional loans required at least 3 percent.
And, these low-downpayment loans require mortgage insurance. This can add thousands of dollars in costs over the life of the loan. In fact, insurance is due for the entire 30-year loan term.
VA loan holders also enjoy extra protections that have resulted in lower foreclosure rates for veterans.
The VA actively helps keep borrowers from defaulting on their loans. It will look for a pattern of late or missing payments and contact borrowers and lenders to work to avoid foreclosure.
America’s military service veterans are everywhere, tens of millions strong. They look no different from anyone else. But in one important way they are very different. That is through access to the benefits extended to them by a grateful nation via the Department of Veterans Affairs.
One of the most important of these benefits is the ability to buy a home with 100 percent financing thanks to the VA Loan program.
What Are Today’s VA Rates?
VA loan rates are extremely low, and are spurring today’s veteran to consider becoming a homeowner.
Get a rate quote for your VA home loan, and see how much you can afford. No social security number is required to start, and quotes can be completed in minutes.