Hey there, heroes! If you’re reading this, it’s clear that you’ve dedicated a part of your life to serving our great nation, and for that, we offer our heartfelt thanks. 

But guess what? America is not done thanking you just yet! 

Today, let’s dive into the VA loans and the benefits they bring to the table for those who have served and for other qualifying individuals.

What are VA loans?

VA mortgage loans are the ultimate game-changer for veterans, active-duty military personnel and surviving spouses looking to purchase or refinance a home. 

This loan is backed by the U.S. Department of Veterans Affairs, which means that VA-approved lenders are lining up to offer you sweet deals with unbeatable perks. Because a government agency guarantees VA home loans, lenders know that even if a military borrower defaults on the loan, the VA guarantees to pay it back to the lender. 

VA loans are designed to assist veterans in obtaining credit and competing in the housing market and have less stringent credit, down payment and debt-to-income requirements than conventional loans. They also usually have lower borrowing rates and closing costs. 

These benefits make them an excellent choice for any veteran, especially for first-time buyers who may require additional assistance in today’s competitive housing market.

Who can qualify for a VA loan?

The first step to getting a VA loan is to get a certificate of eligibility.

To obtain the certificate, you must provide service-related documents, which vary depending on whether you are on active duty or a veteran. 

To be eligible, you should have completed a minimum of 90 continuous days of active service during wartime or 181 days of active service during peacetime. 

You’re also eligible if you have served in the National Guard or Reserves for six years or served 90 days (at least 30 of them consecutively) under Title 32 orders. 

Military widows or widowers can also qualify if their spouse deceased while serving or due to a service-related disability. 

Veterans who have experienced bankruptcy may still be eligible for a VA loan. Generally, you must wait two years after filing for Chapter 7 bankruptcy or 12 months after Chapter 13 bankruptcy before qualifying.

VA home loan requirements

• Credit score: Although the VA has no specific credit score requirement, most lenders typically look for a minimum credit score of around 620. However, it’s important to note that each lender may have their own specific credit score requirements.
• Income: Borrowers must have a stable and sufficient income to cover their monthly expenses, including the mortgage payment. Lenders will evaluate your income and employment history to ensure you have the financial capability to repay the loan.
• Reserve funds: Before approving your loan, many lenders will require you to have enough reserve funds, typically equivalent to two to three months’ worth of mortgage payments. This isn’t a down payment but a reassurance to the lender that you have funds available. 
• VA Fund: On a home loan that is VA-backed or VA-direct, the veteran, service member or survivor makes a single payment known as the VA funding fee. Given that the VA home loan program does not call for down payments or ongoing mortgage insurance, this charge aids in reducing the cost of the loan for American taxpayers.

Types of VA Loans

The VA offers several different types of mortgage loans. The right one for you will depend on your goals and your individual circumstances. 

Home purchase loans

Qualifying veterans can buy a home with a reasonable interest rate with the aid of VA home purchase loans. These purchase loans also do not require a down payment or private mortgage insurance but will require the funding fee we previously mentioned.

Cash-out refinance loans

With cash-out refinance loans, service members can swap out their conventional mortgage for VA loans. They can then use the equity in their homes to pay off debt, pay for school or make modifications to their homes. This refinancing choice turns home equity into cash, and a new mortgage is offered for a bigger sum than the current note.

Interest rate reduction refinance loan

When refinancing an existing VA loan, a VA Interest Rate Reduction Refinance Loan (IRRRL) does so without many of the conditions that are necessary for a traditional refinance. 

With this form of refinance, sometimes referred to as VA streamline refinance loans, you can avoid an appraisal and a credit check while lowering your monthly payments and locking in a low, fixed interest rate. 

A fixed-rate loan can be refinanced at a reduced interest rate, or an adjustable-rate mortgage (ARM) can be converted into a fixed-rate loan through this VA-loan-to-VA-loan process.

Native American Direct Loan

The Native American Direct Loan Program (NADL), provides financial assistance to qualified Native American veterans for the purchase, building or remodeling of homes situated on federal trust land.

VA Loan benefits

VA home loans offer several benefits to eligible veterans, service members and their families, making it easier for them to purchase or refinance. 

• No down payment: One of the most significant advantages of a VA loan is that eligible borrowers can purchase a home without a down payment. This feature sets VA loans apart from many other mortgage options.
• Lower interest rates: VA loans typically have lower rates than conventional mortgages. The Department of Veterans Affairs guarantees a portion of the loan, making it less risky for lenders, possibly resulting in lower interest rates for borrowers.
• No private mortgage insurance (PMI): Unlike conventional loans, VA loans do not require private mortgage insurance (PMI). PMI is typically required when borrowers put less than 20% down on a home, but VA loans exempt borrowers from this additional cost.
• Flexible credit requirements: While lenders set their own credit score requirements, VA loans generally have more lenient credit standards than conventional loans. This flexibility can make it easier for eligible borrowers to qualify for a VA loan.
• No prepayment penalties: Borrowers can pay off their VA loans early without any prepayment penalties. This benefit allows borrowers to save on interest and potentially pay off their mortgage faster.
• Assistance in case of financial hardship: The Department of Veterans Affairs offers support to borrowers who encounter financial difficulties and are struggling to make their mortgage payments. The VA has dedicated resources to help veterans avoid foreclosure and explore options for loan modification or repayment plans.
• Options for refinancing: VA loans offer refinancing options such as the Interest Rate Reduction Refinance Loan (IRRRL) or the Cash-Out Refinance Loan. These programs can help borrowers lower their interest rates or tap into their home equity for other purposes.
• Accessibility: VA loans are available to a wide range of eligible borrowers, including veterans, active-duty service members, National Guard members and surviving spouses. The flexibility of VA loan eligibility criteria makes homeownership more accessible to those who have served in the military.

Let Compass Mortgage serve you in your homebuying process

Are you a veteran, active-duty service member or a surviving spouse of a military hero? At Compass Mortgage, we are dedicated to serving those who have served our country whether they’re looking to buy a new home or refinance a mortgage.

When you choose Compass Mortgage, you’ll receive expert guidance and personalized assistance every step of the way.

Our team of experienced professionals understands the unique needs of veterans and military families, and we are here to help you navigate the VA loan process smoothly.

Start the VA application process with Compass Mortgage.

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