Serving our country can put pressure on families who have to relocate often or part with a military member serving overseas. Frequent relocation, whether from base-to-base or country-to-country, makes saving money a daunting task. Without financial reserves, purchasing a home appears daunting thanks to down payments and closing costs.
However, the Veterans Affairs Home Loan Guaranty program is designed to help veterans not only buy a home, but save money in the process. In recent years, VA loan volume spiked because of its most attractive possibility: no down payment. Qualified borrowers won’t have to put down a penny to buy a home with a value of up to $417,000 or higher in more costly counties.
The VA does not issue these loans, but instead insures up to 25 percent of each one. Because of this guarantee, lenders are willing to offer competitive interest rates through VA loans. With lower rates and no private monthly mortgage insurance, monthly payments shrink. This gives borrowers the chance to pocket more of their money instead of pouring it all into mortgage payments.
There’s also a chance that sellers will cover up to 6 percent of closing costs, thus decreasing borrowers’ costs. Again, borrowers have a chance to save money that would likely be spent if using a conventional loan.
Qualifying for a VA loan is easier than doing so for conventional financing options. The VA does not have a credit score requirement, but lenders like to see scores of about 620. Even history of foreclosure or bankruptcy does not immediately disqualify borrowers from the VA loan program.
Honorably discharged military members qualify for the program, as do those who served on active duty for three or more months during war or 181 days of active duty during peacetime. Members of the Reserves or National Guard who served at least six years may qualify, too. Spouses of military members who is a prisoner of war, missing in action or died in action may be eligible for the program.
The first step in getting a VA loan is filling out a Certificate of Eligibility (COE) from the VA. This document simply confirms that you can qualify for the program. The VA website has the document, but prospective borrowers can also contact a VA-certified lender for more information about VA loans and how they can help save money in the long run.
Photo thanks to WonderLane under creative common license on Flickr.