For many Service Members, both past and present, using their VA Eligibility to purchase a home sounds like a great option- and it can be! We sat down with Bart Rice of The Rice Financial Group, a local Mortgage Broker, to get answers to 7 of the most common questions about VA Loans.
- What is a VA Loan?
A VA loan is a loan that is backed by the Department of Veteran's Affairs. It helps U.S. veterans, active duty service members, and widowed military spouses buy a home with no down payment.
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- How much cash should I have on hand if I want to use a VA Loan?
Most VA borrowers are eligible for 100% financing but may need money for closing costs and prepaid items. However, the seller is allowed to offer up to 4% of the purchase price towards the buyer's closing costs and prepaids so essentially a VA buyer can buy a home with no cash at all!
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- Who benefits the most from using a VA Loan?
As mentioned above, It helps U.S. veterans, active duty service members, and widowed military spouses buy a home. However, it can benefit all parties involved as it can make home buying easy by not requiring any cash from the borrower.
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- Is there a credit score requirement?
While there is no minimum credit requirement, most lenders require a 620 FICO but we can go as low as 580 FICO score.
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- I want to build a home. Can I use a VA Loan?
Yes, a construction loan is an acceptable use of a VA loan. Qualified military borrowers can use VA entitlement toward a new construction mortgage. VA rules require that the builder be VA Approved so it is important for you to confirm the builder's eligibility before signing any contracts.
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- Are there downsides to using a VA Loan?
Some people are concerned with VA loans regarding their more stringent appraisal inspections, but if a home is in decent livable and functional condition, one will not have any issues getting approved. Another consideration is the VA Funding Fee which runs anywhere from 1.25%-3.5% of the purchase cost. This fee is added to the total loan which increases your monthly payments.
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- Can I refinance a VA Loan?
Yes! In fact, VA offers the "interest rate reduction loan" which does not require an appraisal and less supporting documents typically required for a home purchase or traditional refinance.
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If you have been thinking about buying a home using a VA Loan, it's important to use a lender that is experienced in the VA Loan process. Your Real Estate Agent should also have a working knowledge of VA requirements to ensure you don't waste time looking at homes that don't qualify.
