Whether purchasing a new home or refinancing an existing mortgage, a VA loan is often times the best program available and may save you thousands of dollars. This no-down-payment loan was created specifically for veterans, service members, and their families.
What Is a VA Loan?
A VA loan is a mortgage loan issued by private lenders and backed by the U.S. Department of Veterans Affairs. It helps U.S. veterans, active duty service members, and widowed military spouses buy a home. This type of loan is appealing to veterans because it is easier than a traditional loan to qualify for and does not require a down payment, unlike many other loans.
How Do VA Loans Differ from Traditional Mortgage Loans?
Like FHA and USDA loans, VA loans are considered nonconventional (or government) loans. You may borrow 100% of the purchase price, and in some cases, negotiate with the seller to pay some or all of your closing costs, meaning you will have minimal or no cash out of pocket. Lending guidelines are a bit more relaxed than for conventional loans, but there are certain thresholds that must be met, such as a calculation performed for residual income, which is essentially the amount of money left over after paying expenses each month.
Typically, a VA borrower needs to provide the lender with a Certificate of Eligibility and a DD214 form.
VA Loan Benefits
When it comes to VA loan benefits, there are plenty. These loans work best for veterans and their families because of the unique and hassle-free benefits offered. You won’t need a down payment, and you won’t need to pay monthly mortgage insurance. There is an up-front funding fee that typically gets included in the loan amount, but this amount may be waived if you have a qualifying disability.
Compared to conventional loans, you can also qualify with a lower credit score and more debt. Additionally, you can use the benefits of VA loans more than once, although VA charges a higher funding fee for subsequent uses.
What’s Needed to Qualify?
In addition to the typical items such as paystubs, W2’s, tax returns, and bank statements, there are a few additional items needed for a VA loan, which include:
- A certificate of eligibility which determines the type and length of service
- A DD214 form which indicates that you have been released or discharged from service
- A minimum credit score of 620
- A debt-to-income (DTI) ratio less than 41%, although loans can be approved with a DTI significantly higher when extenuating circumstances (such as good credit) are present.
Determining the Right Loan For You
Since 1994, Butler Mortgage has worked with both first-time and seasoned buyers wanting to own a home in Central Florida. We understand the various loan options for your unique situation and can provide quality advice to aid in your decision. Let us help you find the right loan solution by calling 407-931-3800 or by filling out our free consultation form online.