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What is a VA Home Mortgage?
A VA mortgage, also known as a VA loan, is a type of home loan program offered by the United States Department of Veterans Affairs (VA). It is designed to help current and former members of the U.S. military, including veterans, active-duty service members, reservists, and certain surviving spouses, to become homeowners with favorable terms and conditions.
A VA home loan is truly one of the best benefits available to U.S. Veterans today. And a much deserved thank you for serving us and protecting our freedoms. There are many features of VA mortgage loans that are worth mentioning:
- No Down Payment: There is a ZERO down payment requirement, by far, one of the best features. This is a huge advantage for military personnel who may not have saved up enough for a conventional mortgage down payment. This benefit also allows Veteran buyers to keep more cash in their pockets.
- Seller Contributions Allowed: The sellers are allowed to contribute as much as 6% towards the closing costs of the home purchase. This is the most allowed of any loan product. Again, helping buyers who are low on cash.
- Lower Interest Rates: VA loans often come with lower interest rates compared to conventional mortgages. This can result in lower monthly mortgage payments and save borrowers money over the life of the loan.
- Flexible on Loan Types: Buyers can have a choice of fixed-rate or adjustable rate-mortgage. VA also offers Cash-Out Refinance loans.
- VA loans don’t have limits, they actually have a limit on the amount they guaranty. This allows the lender to offer VA loans at more favorable terms.
- No Private Mortgage Insurance (PMI): FHA and most conventional mortgages require borrowers to pay for private mortgage insurance if they put less than 20% down on the home. There is no private mortgage insurance required with a VA mortgage, which shaves a significant amount off of the monthly payment.
- Flexible Credit Requirements: While VA loans have credit score requirements, they are generally more forgiving compared to conventional loans. This can be beneficial for military personnel who may have had some financial challenges due to deployments or other circumstances.
- Limits on Closing Costs: There are limits to the amount the lender can charge for closing costs. This helps reduce the upfront expenses associated with buying a home.
- There is no penalty for early loan pay-off.
- A VA mortgage loan is Assumable: which means that if the borrower decides to sell the home, a qualified buyer can take over the existing VA loan, potentially making the home more attractive to prospective buyers.
- Veterans who have had a VA loan before may still be able to get another VA loan.
- Available Assistance: VA may be able to provide some assistance if the borrower runs into financial difficulty.
Who Is Eligible for a VA Home Mortgage?
It’s important to note that even though VA loans offer many advantages, they are available exclusively to eligible veterans and military personnel. To obtain a VA loan, borrowers need to meet specific service requirements and obtain a Certificate of Eligibility (COE) from the VA. Additionally, the property being purchased must meet certain standards set by the VA.
The qualifications for a VA (Department of Veterans Affairs) mortgage are as follows:
- Eligible Military Service: The primary qualification for a VA mortgage is having a record of eligible military service. Generally, veterans, active-duty service members, and some surviving spouses may be eligible. Specific requirements can vary based on the length of service, the period served, and other factors.
- Certificate of Eligibility (COE): To apply for a VA loan, you will need to obtain a Certificate of Eligibility (COE) from the VA. This certificate verifies your eligibility for the loan program and can be obtained through the VA or your lender.
- Satisfactory Credit: Although there is no specific credit score requirement set by the VA, most lenders will have their own credit score guidelines for VA loans. Generally, a higher credit score will increase your chances of approval and may affect the interest rate offered.
- Stable Income: You must have a stable and reliable source of income to demonstrate that you can afford the mortgage payments.
- Debt-to-Income (DTI) Ratio: The debt-to-income ratio is an essential factor in the mortgage approval process. Typically, a DTI ratio below 41% is preferred, although lenders may have some flexibility in certain cases.
- Property Requirements: The property you intend to purchase must meet certain safety and livability standards. It will be subject to a VA appraisal to ensure it meets these requirements.
What Credit Score Does a VA Borrower Need?
The VA (Department of Veterans Affairs) itself does not set a specific minimum credit score requirement for VA borrowers. However, most lenders who offer a VA home mortgage will have their own credit score guidelines.
In general, to qualify for a VA loan, a borrower’s credit score should typically be at least around 620 or higher. Keep in mind that lenders may have varying requirements, and some may be more flexible with credit scores than others.
Having a higher credit score can be advantageous when applying for any mortgage, including a VA loan. A higher credit score may lead to more favorable interest rates and better loan terms, potentially saving you money over the life of the loan.
Although an important part of eligibility, credit scores are just one of many factors considered during the loan approval process. Lenders also evaluate other aspects, such as income, debt-to-income ratio, employment history, and the borrower’s overall creditworthiness.
It is important to note that VA home mortgage lending guidelines and regulations may change over time, so I recommend checking with a VA-approved lender or the Department of Veterans Affairs for the most up-to-date information on VA mortgage qualifications. Additionally, eligibility and requirements may differ for specific situations, so it’s best to consult with a knowledgeable VA loan specialist to understand your individual eligibility and options.
Explaining VA Loan Limits
The VA’s loan limits are now tied to the conforming loan limits set by the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. Today’s loan limits for FHA loans is $726,200 in most of the country. For Frederick County and Montgomery County Maryland, the FHFA limit is $1,089,300.
Howard, Carroll, Anne Arundel, Baltimore and Washington Counties conforming loan limits will be $726,200, as well as all other counties in Maryland. You can check your county’s loan limits on the FHFA.gov website.
The VA loan limits are a bit different than what most people understand about loan limits. The VA limits represent how much you can borrow before having to factor in a down payment. Qualified borrowers in Frederick County can obtain up to $1,089,300 without having to make a down payment.
Down payments aren’t required on VA loans unless you seek a loan amount above the county loan limit. With the median single-family home price hovering just below $600,000, in Frederick County, most VA borrowers have no need for a down payment.
The VA borrower must still qualify for the loan amount they are seeking. The VA limit allows buyers great freedom in choosing their home in Frederick County.
We don’t hear much news about assumptions when the rates are low, but we do when they have increased after a time of low mortgage rates. When rates increase, as they are apt to do when the inflation is looming, the lower rates of an assumable mortgage will be very attractive to buyers. Assumable loans have future value built in.
After five to seven years of homeownership, a Veteran homeowner puts his house on the market, the assumable mortgage will be at a great advantage if rates have increased. A future qualified buyer can assume that mortgage in a market where rates could feasibly be several percentage points higher. This puts that home seller at a great advantage.
VA Mortgages In Summary
The VA home mortgage program allows eligible veterans, active-duty service members, and certain surviving spouses to obtain mortgages with several distinct advantages. The VA home mortgage is a government-backed loan program that aims to assist members of the U.S. military and veterans in financing their dream home, and achieving homeownership with favorable terms and benefits.
Homeownership is the main tool for building wealth for the majority of Americans. Veterans deserve the added value that the VA home mortgage provides. Interested individuals should contact VA-approved lenders or loan specialists who can provide personalized information based on their unique circumstances. Let us know if you would like a referral for a great VA approved lender!
For More Resources on VA Mortgages
As BRAC, the Defense Base Closure and Realignment Commission, is moving home buyers to Military bases in Maryland, the Highland Group is ready to help our military personnel, Army, Navy, Marine, Coast Guard Service members find their home of choice in Maryland.
The local base in Frederick, Fort Detrick, is expanding, and military personnel are moving to central Maryland, and Frederick County in specific. 100% home loans for Veterans are offered in Frederick County.
Contact us for a list of preferred VA Lenders for 100% loans for Veterans
Chris & Karen Highland
eXp Realty – 301-301-5119
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