VA Loans Explained – 7 Things Every Veteran Should Know About the Best Loan Available

1. VA loans allow veterans to borrow 100% of the funds needed to purchase or refinance a home. In the current state of our economy, these types of guidelines do not exist for conventional borrowers no matter how good their credit is.

2. The VA guarantees a portion of the loan and does not require veterans to pay for monthly mortgage insurance. Mortgage insurance is required if less than a 20% down payment is used with conventional financing. Mortgage insurance can cost a anywhere from a hundred to several hundred dollars a month. Avoiding mortgage insurance is a huge advantage to the VA loan.

3. VA financing will allow the seller to pay all of your closing costs, including pre-paid items, meaning taxes, home owners insurance and any interest due from the day you purchase through the end of the month.

4. The income and credit score guidelines for VA financing are more flexible and allow for higher debt-to-income ratios compared to conventional financing. Higher ratios allow more veterans to qualify for the homes that they want.

5. The VA has no cash reserve requirements. This means that a veteran may purchase or refinance a home without having any reserve cash in the bank. Conventional mortgage guidelines require the borrower to have anywhere from two to six times their mortgage payment in the bank as reserves. Most people’s bank accounts fluctuate each month and given the current state of the economy, this too allows more veterans to qualify for homes.

6. VA closing costs are usually lower than conventional financing costs because there are no “junk fees” allowed per the VA guidelines. This should be the rule on all types of financing. Unfortunately, there are many mortgage companies out there who charge all kinds of ridiculous fees.

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7. One would think that with all these benefits there has to be a catch. Perhaps there is a higher rate? Absolutely not. Even with no down payment, the VA home loan rates are comparable and usually lower than conventional mortgage rates. When a low rate is combined with no money down, no monthly mortgage insurance, it is extremely hard to compete with. Being a veteran myself, I was always told that getting a VA loan was a hassle and that there was not much of a benefit. Nothing could be further from reality. I wish I had known the truth about VA loans when I bought my first house.