In a February 12, 2013 State of the Union address, the President promised to “keep faith with our veterans, investing in world-class care, including mental health care, for our wounded warriors, supporting our military families; giving our veterans the benefits and education and job opportunities that they have earned.”
Servicemembers and veterans may recall similar promises from politicians of all parties, few of which delivered much. However, one program that continues to provide genuine benefits and privileges for veterans and those now serving in the military -- along with their spouses and certain others -- is the U.S. Department of Veterans Affairs' Home Loan Guaranty.
VA Home Loan Benefits
It's important to recognize that the federal government is not going to lend you any money; it guarantees a portion of the loan that you receive from a commercial lender. Because this reduces that lender's risk, you can get a much better deal.
Here's what's great about VA home loans:
- Zero down payment. VA mortgages can finance 100 percent of the property’s sales price (or appraised value, if that number is lower).
- No mortgage insurance. You don't have to pay private mortgage insurance premiums (MI).
- No early repayment penalty. You can pay off your VA mortgage loan early if you want to without incurring any penalty.
- Flexible underwriting. VA credit, asset and income underwriting is more forgiving than that of most conventional programs.
- They’re assumable. And the person assuming the loan doesn’t have to be a veteran.
In addition, you may be eligible for help from the VA if you fall behind with payments.
Obtaining a VA Loan with Bad Credit
For some, a huge benefit to getting a VA mortgage is that they're able to get a VA home loan with bad credit. That doesn't mean that everyone's eligible – even though the VA sets no minimum credit score, the mortgage lenders that make the loans often do. Applicants with FICO scores in the 620-680 range stand a reasonable chance as long as they have enough disposable income to cover their monthly payments.
On The San Francisco Chronicle Website, Ray Cole suggests a number of ways in which those with borderline credit can improve their chances of getting approved for a VA mortgage -- including getting in touch with LendingTree.
VA Loan Qualifications
Your first priority when applying for one of these mortgages is to obtain a VA loan Certificate of Eligibility (COE). You can apply for one online, or just leave it up to your VA-approved lender. You'll need to fall into one of these categories:
- Serving or discharged member of the National Guard or Reserve
- Member of the services still on active duty
- Surviving spouse of a service member who died either on active duty or directly as a result of his or her military service.
There are a few other groups of people who may be eligible for a VA home loan, and it's worth checking the official eligibility Web page for further details and conditions.
VA Loan Calculator
As with any mortgage, your first step with a VA loan is to work out how much you can afford to pay for your next home. Why not check out LendingTree's home affordability calculator to get a good idea of your personal budget? Already have a budget in mind? Secure your hard earned VA home loan.