Veteran’s Day this year is November 11th, but let’s go ahead and celebrate our veterans every chance we get. There’s never a better time than “right now” to remind those who have served our country, their spouses and families, who much we appreciate them. It is fitting then that the best mortgage available to home buyers just may be the one that was created for our Vets!
When comparing mortgages, especially when you’re low on cash, it just doesn’t get better than a loan that requires no down payment. The option of not having to pay closing costs and no private mortgage insurance requirement sweeten the deal!
VA loan requirements are different from other loans types. Let’s take a look at three of the most frequently asked questions we receive about VA loans.
So who can get a VA loan?
Bill Gassett, in this post What are the Benefits of a VA Loan, answers this question for us. In his post, he notes;
“Here are the criteria for who is eligible to get VA Mortgage financing to purchase a home. The Veterans Administration offers this kind of mortgage to four different types of veterans under the following circumstances:
- Active duty service men and women – to get a VA loan, you must have served at least 90 days in the military during a time when the country is at war.
- Active duty during peace – in order to get a VA loan you must have served at least 181 days as full-time military personnel during a time the country was at peace.
- National Guard or Reserves service – you must have served at least six years in either the Reserves or the National Guard.
- Surviving spouse – you can also be a surviving spouse of a person that either (a) perished while serving in the line of duty or (b) died due to a disability related to their service.”
What’s the minimum VA required credit score?
The good news is that because of the government guarantee on a VA loan, mortgage lenders tend to be more lenient with their credit score requirements and program overlays.
With many mortgage lenders I’ve seen, who closed a VA loan recently, if you aimed at a credit score of no lower than 620 you’re more than likely good to go. In comparison, you’d need a 700 credit score or higher for most conventional loans.
Lenders of course also look at the borrower’s ability to repay the loan. This includes confirming;
- Stability of income
- Debt to income ratio guidelines too are quite ‘easy going’ compared to conventional mortgage financing. According to Russ Tanner with PrimeLending, “This can vary and there is not a set answer. Usually, 55-56% is about as high as VA will allow.”
How much are closing costs for a VA loan?
The amount the veteran borrower will pay for a VA loan’s closing costs varies by your lender, home, where you are buying and other factors, but a good estimate is a range between 1%-5% of the loan amount in closing costs.
To help, the VA also limits the borrower’s closing costs to a specific list of items. Some things the seller is on the hook for per VA loan requirements.
Don’t forget though when it comes time to negotiate that the seller can pay all or part of your closing costs. This could quite possibly allow you to buy a home with no money out of pocket at closing.
Speak with your real estate agent about the various ways of handling VA closing costs.
Does the home that I purchase have to be my primary residence?
VA loan guidelines require the borrower to certify at closing that the home will be owner-occupied as their primary residence. As a general rule, you’ll have 60 days from closing to take occupancy.
Just to note however, for service members deployed on active duty, occupancy by their spouse or dependent child(ren) fulfills the occupancy requirement.
Contact the Regional Loan Center with questions about the occupancy requirement. You’ll locate yours on the U.S. Department of Veterans Affairs website.
What the first step? Obtaining your Certificate of Eligibility, and you can do that online or through your lender. Takes minutes!
One other question that arises many times. I had a lender tell me recently that Veteran’s United, Navy Federal Credit, and USAA make people feel like they are the only one’s who can do VA loans. Most mortgage lenders you run into today also do VA. A great resource for shopping rate and service on a VA loan? Ask your real estate agent.
Real estate agents knows which lenders make a transaction go smoothly and which do not. They know that it’s the mortgage originator or loan officer, not the mortgage company, that typically makes the loan process go like clock work or stall. Be it lenders, home inspectors, contractors, you name it, if your agent refers them to buyers they work with that’s because they haven’t dropped the ball in the past. They haven’t messed up! This makes whoever their referral is definitely worth your while to chat with on the phone to see what they can also do for you!