VA loans or Veteran Affairs Mortgages are loans that are made available to active military members and veterans. A down payment is not always mandatory here. Although these loans are offered by private lenders, they come with a guarantee from the Department of Veterans Affairs, which makes it risk-free. Therefore there is no need to go for any mortgage insurance. Also, you need not worry about your credit score.
When compared to many other loans and mortgages, VA loans seem to be easier to qualify for. However, there are a few things you need to know when it comes to VA loans:
You become eligible to obtain a VA loan if you are a veteran, a reservist, a national-guard member or a member of the military. Spouses of those military members who have met with a service-connected disability or have died while on active duty can also apply for VA loans.
In case you are an active-duty member, you qualify for a VA lone after completing six month of service. If you are a National-Guard member or a Reservist, you will have to wait for a period of six years in order to apply for a loan. However, if you are called for active duty within that period of time, you stand to gain eligibility once you complete 181 days of service. During war periods this time period reduces to 90 days.
Nevertheless, every potential borrower would need a certificate of eligibility before applying for the VA loan. You can submit this form online.
Advantages of VA Loan:
- No down Payment: This is a major plus point in VA loans. This means you can right away purchase your property without saving up any money.
- No Mortgage Insurance: Generally if your down payment is less than 20%, the FHA makes it mandatory to go for mortgage insurance. However, in the case of a VA loan you need not pay for the mortgage insurance although you don’t make a down payment.
- Low Fees: There is a one-time funding fee that you have to pay in case of a VA loan depending on what type of veteran you are and how much down payment you make. However, this is much lower when compared to the other types of mortgages. For instance, if you are an active member of the armed forces, who is getting his first VA loan without down payment, you may have to pay 2.15% of the loan amount as fees. If you are a reservist or a national-guard member you end up paying a little more than what the active-duty members need to pay. For people who are on disability compensation, this fee will be waived off.
- No minimum Credit Score: This loan comes with a guarantee from the Department of Veterans Affairs and therefore you may not require a minimum credit score to get one. Nevertheless, you need to show that you have adequate income to repay the loan and that you are not in an excessive debt.
VA loans are a lot more flexible when compared to conventional mortgages. You will be able to use your home-loan benefits for about a year or two even after the foreclosure or a bankruptcy.
One thing to remember is that a VA loan is available only for your primary home. You cannot use it to purchase an investment home or a refinance vacation.
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