Buyers: What You Need to Know about VA Loans

Our REALTORS® know that no matter what your homebuying goals are, the process of getting a loan can seem intimidating. Whether you're looking at Mansfield or Ashland homes for sale, the question of financing looms large for most buyers.

If you're a U.S. military veteran, the Veterans Administration loan program may be a good fit for you.

Known popularly as the "VA home loan," it's one of the biggest benefits offered to America's veterans. It grants a wide range of perks compared to conventional loans, including no down payment and attractive rates. There are many other advantages that you might qualify for.

What Is a VA Home Loan, Exactly?

When you use a VA loan, you aren't getting funds directly from the U.S. government. Instead, the VA sets standards that lenders are required to follow in order to participate in the program. In exchange, if a borrower defaults, they are compensated for some of the value they stand to lose.

What Benefits Does a VA Home Loan Have?

A VA home loan offers the following great perks:

• No down payment
• No private mortgage insurance requirement
• More flexibility in your credit score and income
• Low interest rates

At times when conventional mortgage rates are rising, VA home loans are particularly attractive. If you compare lenders, you'll often find that choosing a VA home loan will save you thousands of dollars over the course of your mortgage.

Am I Eligible for a VA Home Loan?

Though many current servicemembers and veterans qualify for a VA loan, not everyone takes advantage of it. One of the reasons why is that some of the program details change on an annual basis. This can make it seem much more complicated and confusing than it actually is.

The key requirements are:

• Certificate of Eligibility
  You must be entitled to a Certificate of Eligibility (COE) based on your military service record. Veterans and servicemembers who have served at least 90 consecutive days on active duty during wartime or 181 days during peacetime will generally qualify, as will eligible surviving spouses.
• Primary Residence
  You must purchase a primary residence with the intent to live there. You cannot use a VA home loan to purchase an investment property. Likewise, although current service members can qualify for the VA home loan, a spouse may need to fulfill the requirement to live in the home within 60 days of closing.
• Underwriting Requirements
  You must meet underwriting requirements for the loan, including credit score and income, although these requirements can be lower than with a conventional loan. Current service members not separating from the military within 12 months of their loan closing will generally meet income standards.

New Adjustments to VA Home Loan Terms for 2021

VA home loans no longer have a value limit for qualified buyers, so first-time loan borrowers don't need to worry about a specific cap for their loan amount. Subsequent loans can be subject to caps.

Almost all borrowers will need to pay funding fees established by the VA based on the details of your transaction. The funding fee varies significantly, but it can range anywhere from 0.5% for refinancing to 3.6% for some larger home purchases. Rates change based on the value and type of loan, the amount of your optional down payment, and whether you've had previous VA loans.

Some borrowers are exempt from the funding fee, including Purple Heart recipients on active duty, veterans with service-related disabilities, and some surviving spouses.

Contact us today to learn about real estate opportunities in Ohio.