Veterans have spent substantial portions of their life serving the country and its citizens. As a symbol of gratitude to veterans, the United States government offers military members rewards and benefits. These perks include health insurance, education, and even housing in the form of Veterans Affairs (VA) loans and other particular services.
The United States created the VA home loan in 1944 to help returning service members after their service in World War II to help them find a home without needing to have excellent credit scores and down payment. It has so far guaranteed more than 25 million VA loans that have helped many veterans, active-duty military members, and families.
The VA housing loan program has been needed more than ever during the COVID-19 pandemic as veterans and active military personnels’ finances have been greatly affected.
VA Loans are Guaranteed
Eligible veterans and service members, including surviving spouses, can become homeowners through the VA Home Loans program. VA loans are not issued directly by the government and granted by private lenders, like banks and mortgage companies. You also do not need to buy private mortgage insurance, unlike conventional loans. The Department of Veterans Affairs guarantees part of these loans. In other words, the VA provides at least a quarter of the total loan amount to the lender, providing more confidence when allocating these mortgages.
Loans are Available Even if You’ve Declared Bankruptcy
A VA loan after bankruptcy is possible, but, of course, it will take time. Unlike some other loans, previous bankruptcy or foreclosure does not necessarily impact a veteran’s ability to acquire a VA loan. This is because VA borrowers usually have a lower required credit score compared to others. However, there is a waiting period before eligibility for a VA home loan.
- Have served at least 90 consecutive days of service during wartime, or
- Have served at least 181 days of active service during peacetime, or
- Have at least six years of National Guard Service or Reserves, or
- The spouse of a service member who has died in the line of duty or died as a result of a service-related disability
If eligible, you can obtain a VA Loan Certificate of Eligibility or COE, and either:
- Apply for a VA loan from an authorized lender
- Apply online through the eBenefits portal of the VA
- Apply with the VA by mail using Form 26-1880
Speak to your lender about other requirements for the application of your VA Loan.
In addition to particular benefits, veterans are also eligible for special clauses, such as the “VA escape clause” or “VA option clause,” that allows veterans to nullify a contract in case of failed housing inspections or other unsuitable conditions.
As previously stated, these VA-backed loans are secured with guarantees for lenders. This variable allows lenders to provide borrowers with mortgages at better interest rates than other loans. Interest can be as low as 2.625 percent for a 30-year fixed VA purchase or as low as 2.25 percent for a 15-year fixed VA purchase.
There is also something called an interest rate reduction refinance loan. This loan is applicable if you have an existing VA-backed home loan and want to lower your monthly mortgage payments. Refinancing means replacing your present VA home loan with a new one with a better rate and term.
No Downpayment is Required
Although down payments can help anyone score an excellent mortgage rate, these down payments are often waived or included in veterans’ loan principal in VA loans. The VA loans have a zero down payment mortgage option where eligible borrowers can purchase a property or refinance and an existing mortgage. The cash-out refinance loans allow you to take cash out of your home equity for times when you need cash, such as funding school, paying off debt, or home improvements.
As a service member, you have several benefits after and during active duty. Understanding these perks before approaching a lender can save you thousands of dollars. The VA home loan program is an excellent opportunity for service members and a benefit they greatly deserve.