VA LOAN CAPTAIN BLOG & Learning Center

Why Choose a VA Loan?

By: Grant Moon 09/26/12 09:45 am

Why Choose a VA Loan?

 

First of all, why not?  Seriously, if you are a qualified veteran, service member or active duty and you’re exploring buying a home, then the VA home loan is your first choice. Why?

Easier to qualify

Qualifying for a VA home loan is easier when compared to conventional fare by way of loans underwritten to Fannie Mae and Freddie Mac guidelines.  The VA does not have a minimum credit score requirement and other credit guidelines are relaxed.  Banks however may have their own internal credit score requirement, with most banks asking for a minimum score of 620.  If you’ve experienced bankruptcy in your recent past, as long as the bankruptcy is more than two years since the discharge and you have re-established credit in other areas, you may still qualify.  Conventional loans require four years must pass prior to issuing a new mortgage loan.  Still, even with these relaxed credit guidelines, VA loans still have the lowest default rate of any loan program on the market today.

Down Payment

The VA home loan is the only loan that does not require a down payment. Even the FHA l

oan requires a down payment, but not the VA loan.  This is especially important for those with limited funds to close.

Closing Costs

Closing costs are limited to what the veteran can pay.  Some of those restricted charges include an underwriting fee, a processing fee or a document preparation fee.  Such fees can add up to over $1,000 or more.

When not to choose a VA loan?  When you’ve got some sort of a down payment, you may want to look into an FHA loan or a conventional mortgage.  All VA loans have what is called the funding fee, and can be as high as $3,000 or more on a $100,000 loan.  Even if you put down 20 percent, the minimum required to avoid mortgage insurance on a conventional loan, with a VA loan, there will still be a funding fee.  (This fee is waived for those with a 10 percent or more service-related disability)

Having a down payment makes it a relatively each choice when deciding to take a VA loan.  If you’ve got some down payment and closing cost funds available, explore the conventional mortgage.  If funds are limited, the VA loan is likely your best choice.

Summary

If you are considering VA Loans as an option to purchase your home it always best to know your options. Regardless whichever loan you use, taking on a mortgage is a big responsibility and shouldn’t be taken lightly. The more you know about your options the greater the likelihood that you’ll make the best based on your needs.

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