The Veterans Affairs (VA) loan was born in 1944 when the United States created a special program designed to help military servicemembers returning from war purchase homes. VA-approved lenders must issue the loans, which the U.S. government then backs. Veteran loans offer distinct benefits that include relaxed standards for qualification and no private mortgage insurance requirement. A veteran home loan often requires no money down for qualified buyers in addition to competitive mortgage rates. Read on to learn about some of the leading VA loan lenders and types of VA loans before choosing a suitable loan for your situation.
Benefits of a VA Loan
The advantages of VA loans make them an attractive option for military members who qualify. These benefits make it easier for applicants who might not qualify for conventional financing to own a home, refinance a mortgage or get the funds they need at competitive rates. Benefits include:
- Lower monthly payments with competitive interest rates and no requirement for private mortgage insurance
- No down payment required in many cases
- Simplified qualifications
Veterans United Home Loans
Veterans United is among the leaders in the VA loan world. This VA-approved lender works with former military members who ranked in senior positions in various branches of the Armed Forces, including the National Guard, Coast Guard, Air Force, Navy, Marine Corps and the Army. Veterans United offers home purchase loans and refinance loans to applicants who meet at least one of the lender’s requirements:
- Applicant served 90 consecutive days of active duty during wartime
- Applicant served 181 days of active duty during peacetime
- Applicant is the spouse of a servicemember or died either as a result of a service-related disability or in the line of duty
- Applicant served for least six years in the Reserves or National Guard
VA Loans: Requirements
To begin, you need a Certificate of Eligibility (COE) from the VA. Many loan companies help applicants get this certificate, but you can also download the form from the VA’s website and mail it directly to the VA. This document verifies the length and character of your service.
The VA has no set minimum for a qualifying credit score. Applicants who have scores of 720 or higher often qualify for lower loan interest rates than applicants with fair to poor credit scores do. Additionally, VA loans don’t have a specified minimum income for eligibility. Borrowers still must have a steady, reliable income that’s sufficient to cover monthly expenses and the new mortgage payment while leaving money to cover food, transportation and entertainment costs.
In most areas of the United States, veterans are limited in the amount that they can borrow without having to put money down. As of July 2016, VA loan applicants can borrow up to $417,000 without having to make a down payment. Borrowers buying a home in certain high-cost areas may be able to exceed that amount.
Mortgage Rates for Veterans
When it comes to finding mortgage rates, there’s more to consider than just the APR. Mortgages fall into several types of loans, adjustable rate mortgages (ARM), fixed/ARM hybrids and fixed rate mortgages.
- Adjustable rate mortgages start at the lowest interest amount and adjust upward every 6 to 12 months. The adjustable rate is based on the economic-driven index plus 6% for prime loans and 7% for subprime loans.
- Hybrid loans often include 3/1, 5/1 or 7/1 ARMs, which provide fixed interest rates for 3, 5 or 7 years followed by an adjustable rate. Because these loans start with lower interest rates, they’re a popular short-term option. After the fixed rate period ends, interest rates and monthly payments go up.
- Fixed rate loans lock in an interest rate that doesn’t change for the life of the loan. These rates provide the most interest deduction for your taxes, but you also end up paying more interest over the course of your loan.
To figure out which of these options offers the right mortgage rates for your needs, you have to consider the length of time you expect to live in the home. Consider the following table:
| Years Living in the Home | Ideal Loan Program |
|---|---|
| 1 to 3 | 3/1 ARM, 6 month ARM, 1 year ARM |
| 3 to 5 | 5/1 ARM |
| 5 to 7 | 7/1 ARM |
| 7 to 10 | 15-year fixed, 30-year fixed, 10/1 ARM |
| 10 years or longer | 15- or 30-year fixed |
As the above table demonstrates, the purpose of the loan often dictates the right terms for you. Adjustable rate mortgages are ideal for veterans who plan to stay in a home for a short time because these loans offer the lowest payment amounts.
Other VA Loan Companies
Veterans United doesn’t offer personal loans for veterans or loans for veterans with bad credit. In the past, payday loan companies actively sought out military members and used “bad credit, no credit” slogans and sky-high interest rates. The federal government backs a VA-approved loan, so having bad credit is less of a risk for the lender. Therefore, you’re more likely to get approved and more likely to qualify for reasonable interest rates.
When you’re searching for a lender that offers these types of loans, remember to look for a company that’s VA-approved to maximize the lower rates these loans can offer. VA-approved lenders can help you in every step of the process, whether you need to get pre-qualified and obtain a COE or choose the right loan and get help to complete the application process.
Bottom Line
Before you start your search for a loan for veterans, check your credit report and get your credit score. The Fair Credit Reporting Act entitles you to a copy of your credit report from each of the three major credit bureaus (Equifax, TransUnion and Experian) every 12 months at no cost. By reviewing your credit report, you can address any errors that might show up. Many experts estimate that more than 70% of all United States credit reports contain errors. If you see any mistakes or discrepancies, contact the credit bureaus directly. This could end up saving you a substantial amount of money on the cost of your loan.
