VA Loans: A Brief Perspective
The US, acknowledging the contribution and hardships of military personnel, has gone out of its way to ensure that veterans and their families receive the respect they deserve and their needs are met. This commitment is validated in the various laws and reforms passed to exclusively benefit members of US armed forces. VA loans is one such provision, exclusively available to war veterans and their spouses. We’ll cover some of the benefits of a VA loan below.
VA Loans: Introduction
VA loans, a part of Servicemen’s Readjustment Act passed in 1944, was provisioned to pass on multiple benefits to war veterans and their families. Also known as GI Bill, VA loans were a part of this act, which was signed by President Franklin. D. Roosevelt. The provision made it a whole lot easier for veterans to buy a home, and it would be safe to say that these loans have played a key role in the welfare of veterans.
VA loans entail numerous benefits such as zero down payment and low interest rates, which help veterans to own a house without having to go through the usual nuisances involved with regular mortgage options. The benchmark of qualifiable credit score for VA loan is also quite comfortable, as the program has been designed for those who volunteered to devote their life to national security.
Benefits of VA Loans
- No down payment
- No monthly mortgage insurance premiums
- Lower interest rates compared to other programs
- Seller can contribute towards some of the closing costs (up to 4%)
- No prepayment penalties
Favorable Credit Requirements
Given the selfless sacrifices they made for the country, the government provides relaxed credit requirements for veterans seeking home loans through the VA entitlement program. Consequently, the VA does not require them to maintain a minimum credit score. Lenders, however, have a benchmark when it comes to the required credit score, which is usually around 620. Given this, as a veteran, you should cultivate all possible habits that help build a good credit score. Simultaneously, check for errors on your credit report before applying for a loan. In the case of any doubts, seek advice from a loan officer or credit counselor.
Closing Costs Help
Whether securing a VA home loan in Texas or some other part of the US, you and the seller can negotiate the closing costs, as in who will pay which fees on VA loans. The seller is allowed to pay all of the closing cost and prepaids up to 4% of the sales price + Title Policy + Survey + around $1,915 in VA non-allowables as part of the negotiations of the contract. Here’s a list of closing costs you need to consider:
- Loan origination fee
- Loan discount points
- Credit report fee
- Appraisal fee
- Title insurance
- Hazard insurance and real estate taxes
- VA funding fee
- Recording fee
Bankruptcy and VA Loans
VA loans for veterans has been planned to benefit the veterans through thick and thin. For instance, VA home loans are available even after a bankruptcy. If a veteran or his family has filed for chapter 7 or chapter 13 bankruptcy, they can still apply for a VA loan after a certain minimum waiting period, and/or obligations have been met.
The US Government has clear guidelines defining the qualification criteria for VA loans. Understanding that everyone may go through a rough patch with veterans being no exception, the government didn’t want anyone to lose out on any benefits because of a small clause and therefore, there is a long list of criteria that cover every soldier who has served in a war zone or international military operation. It also includes the spouse and families of those who died in a war, are prisoners of war, or missing.
- Veterans who have served on active duty for at least 90 days during war time and 181 continuous days during peacetime with an honorable discharge qualify for VA loans.
- Minimum 2 years of service if a veteran enlisted after September 7, 1980 or an officer who joined after October 16, 1981.
- Veterans from National Guard and reservists who have a service of 6 years and an honorable discharge can apply for VA home loans.
- Veterans with a service less than 6 years are also eligible, if their discharge criteria is service-related disability.
- Widows of war veterans are also eligible for the loan, given that they have no remarried.
- Spouses of servicemen missing in action or held as prisoner of war can get the benefits of VA Loan.
- Other US citizens such as Public Health Service Officers, Cadets at the 3 forces, officers of National Oceanic and Atmospheric Administration, Merchant Seamen and others also qualify to benefit from VA loans.
The United States of America is a country with international military presence, maintaining between 700 and 800 military bases worldwide. That is the reason why US soldiers not only serve within the country, but also have to travel far and wide. Therefore, it is appropriate that the government has come up with welfare plans that take care of our country’s heroes.
Despite the fact that VA home loans are a great help for veterans, they have a few downsides such as the funding fee that varies from 0.5 to 2.8 percent of the total loan amount. However, when evaluating the pros and cons of VA loans, the pros clearly outweigh the cons. Still, many people remain skeptical of the program; the main reason being either lack of information or the myths associated with VA home loans.
We can help you steer clear of any doubts and myths about the VA loan program and decide which loan options are optimal for you. Our mortgage experts have extensive knowledge in dealing with all sorts of mortgage plans, including VA home loans in Texas, and have helped first-time buyers secure homes that match their needs and budgets.