VA Home Loans

Military members and veterans have access to one of the best home-buying programs around – the VA Loan.

Eligible service members and surviving spouses can use the VA Loan to buy a personal residence with no money down, no Private Mortgage Insurance requirement, and often at more competitive interest rates than with a conventional mortgage.

And the best part? It’s often easier to qualify for a VA Loan compared to some other types of home loans.

The VA Loan Guaranty program has a long history of helping military members and veterans buy a home.

It was created after WWII to help returning service members achieve the dream of homeownership.

The program has evolved through the years and has helped over 18 million service members, veterans, and surviving spouses purchase their dream home.

Let’s take a deeper look at the VA Loan benefit and why it makes sense to look into buying your next home with a VA Loan if you are eligible.

Quick Guide To VA Loans

• VA Loan Benefits
• Qualifying For a VA Loan
• Steps To Shopping For a New VA Loan
• Best VA Loan Companies
• Best VA Loan Rates

VA Loan Benefits

VA Loan benefits are many, but here are the big ones:

No Down Payment Required

Their biggest claim to fame is the ability to purchase a home with no money down. You can even roll the VA Loan funding fee and any closing costs into the loan if you wish, making this a true no-money down home purchase. Whether that is the right financial decision or not is a different story, as making a down payment decreases your monthly mortgage payment and gives you instant equity in your home.

No PMI

VA Loans also don’t have a requirement for Private Mortgage Insurance, or PMI. Most lenders require homebuyers pay PMI when they don’t make a down payment of 20% or more. PMI is not required for VA Loans, since the loans are backed by the U.S. government. Avoiding PMI is a big deal, as it can easily add 0.5% – 1.5% of your loan amount to your monthly mortgage payment.

VA Loans Can Be Easier To Qualify For

Because VA Loans are backed by the government, lenders are often more willing to approve loans. This makes it easier to qualify for most borrowers. While the VA does not have a set minimum credit score, most lenders do require homebuyers to have a credit score of at least 620.

Limitations on Closing Costs

The VA sets limits for closing costs, making VA Loans more cost-effective for many buyers.

Competitive Interest Rates

Interest rates on VA Loans are often competitive with conventional mortgages and other home loans. I have exclusively used a VA Loan for both of my home purchases in the last 10 years, as well as for 2 mortgage refinances.

VA loans were anywhere from 0.125% to 0.25% lower than conventional loans in each instance – before accounting for buying points or credits on a loan.

VA Loans Are Easy to Refinance

Finally, refinancing a VA Loan is super-easy with a Streamline Refinance. Also called an Interest Rate Reduction Refinancing Loan, or IRRRL, the streamline refinance is a quick, easy, and inexpensive way to refinance a VA Loan.

Because you have already gone through the underwriting process, the VA does not require a new appraisal, credit underwriting, or requalification for a streamline refinance.

You can even roll the closing costs right into your new loan if you wish. To top it off, closing costs are often lower with a streamline refinance since less work is required. I was able to lower my mortgage payment by $300 per month with my last refinance.

Downsides of a VA Loan

There are a few downsides to VA Loans. The VA requires VA loans to be used for the veteran’s personal residence.

So you can’t use a VA Loan to buy a vacation home, undeveloped land, or a rental property.

However, you can use a VA Loan to buy up to a 4-unit home if you plan to live in one of the units.

Finally, the VA assesses a Funding Fee when you use a VA Loan.

This fee varies depending on:

• The type of loan
• The amount of your down payment
• Your military status
• Whether or not you have previously used a VA Loan (the VA assess a higher funding fee for subsequent uses)

That said, the VA Loan funding fee is waived for veterans with a VA service-connected disability rating.

Qualifying for a VA Loan

There are two things you need to know about qualifying for a VA Loan – eligibility, and qualifying for the mortgage itself.

VA Loan eligibility is based on military service, or for unmarried surviving spouses of those who died on active duty.

In general, you are eligible if you have 90 days of active duty service during a named conflict, 181 consecutive days of active duty during peacetime, or 6 years of service in the Guard or Reserves.

VA Loans require a Certificate of Eligibility (COE), which certifies you are, in fact, eligible for a VA Loan.

This can be obtained directly from the VA, or your lender can obtain it for you. I had the lender request it on my behalf for my last home purchase, which saved me time. (There is no charge to obtain a COE).

Qualifying for the actual mortgage is between you and the lender. In general, most lenders require borrowers to have a credit score of 620 or greater.

However, the better your score, the lower your interest rate and the easier it will be to qualify for your loan.

Most lenders will look at the following:

• • Credit history
  • Credit score
  • Income
  • Debt to income ratio
  • Assets

…and other factors.

Steps To Shopping For a New VA Loan

When shopping for a new VA Loan, I recommend you do several things:

Shopping VA Loan Rates

You can usually do this by contacting companies directly or using online aggregators that compile rates in comparison charts.

Keep in mind, any publicized interest rates are sample rates based on set presets for home price, location, down payment, and credit score.

Your actual interest rate will vary based on your specific situation. And interest rates can change from day to day.

VA Lender Background

Next, consider the lender’s background.

I prefer to work with experienced VA Loan companies. Their loan processors know exactly what is needed and how to efficiently navigate the VA Loan process.

I can’t stress this enough. Buying or building a house can be a stressful time, especially if you are up against a short timeline.

I was able to close my most recent loan with Veterans United in less than a month. That is fast for any mortgage, whether it is a conventional mortgage or a VA Loan. (VA Loans can be slightly more complicated than conventional mortgages, due to VA requirements).

Look Into Local VA Loan Lenders

Finally, don’t discount local lenders. I had an offer from a local lender that matched the offer from Veterans United.

I chose VU because they were more experienced with the VA Loan process, and their underwriting system is handled entirely online. Their reputation gave me the confidence to go with them, and the online underwriting process was very convenient for me.

Remember, closing on a home can be a stressful and busy time. So you need to factor that into your home-buying calculus.

That said, local lenders might offer the best combination of low interest rates and in-person services. So it’s always good to check with a local lender before choosing your VA loan provider.

Best VA Loan Companies

This is the part you’ve been waiting for – where should I get my VA Loan? There are two answers.

The first is that almost any lender can offer you a VA Loan.

The second is that some VA lenders are clearly better than others.

This becomes evident when you are up against a short timeline. The last thing you want to do is work with an inexperienced VA lender when you don’t have much time to spare.

I have purchased two homes in the last eight years and refinanced two other times. I used the VA Loan for all of these transactions because I was able to obtain great service and very low interest rates.

The two companies I used were USAA for my first purchase and both refinances, and most recently, I used Veterans United, which is the largest VA Loan lender in the U.S. (USAA is the second largest VA Loan provider, and the largest military financial organization). I have nothing but great things to say about both organizations.

Top 10 VA Home Loan Lenders

These are the Top 10 VA Lenders, based on several factors, including the number of VA loans they service each year, personal experience, and reputation in the military and financial community.

In the end, you should choose the lender that you are most comfortable with or that offers the best mortgage.

Quick Guide To The Top VA Loan Lenders:

• Veterans United
• USAA
• PenFed Credit Union
• Navy Federal Credit Union
• Lending Tree
• Quicken Loans
• Wells Fargo
• JG Wentworth
• Loan Depot
• Your Local Lender

#1 Veterans United

Veterans United is the largest VA loan provider in the U.S., and by definition, the world!

They focus specifically on VA Loans, and process mortgages entirely online.

Veterans United offered the lowest interest rate I was able to find when I purchased my most recent home.

#2 USAA

USAA is the largest military financial organization in the U.S.

They offer a variety of financial products and services, including checking, savings, investments, insurance, credit cards, and loans, including auto and home.

USAA is a great option if you prefer to have all of your finances under one roof. Their VA Loan rates are always competitive.

#3 PenFed Credit Union

Another military-financial organization, Pentagon Federal Credit Union offers an excellent suite of financial services and online tools to help you.

Their interest rates are generally among the most competitive. PenFed also offers full-service banking, loans, credit cards, and other financial services.

#4 Navy Federal Credit Union

Are you sensing a trend here? Military-focused financial organizations have an advantage when it comes to servicing VA Loans.

They have the expertise and market share to offer great interest rates. Navy Fed is well-known in the military community as an excellent all-around credit union.

#5 Lending Tree

We list Lending Tree here, even though they are not your traditional VA loan provider.

Lending Tree doesn’t originate mortgages. Instead, they offer a marketplace that allows homebuyers to bid their home purchase with several lenders.

This is a quick and easy way to get several quotes at a time and have banks bid for your purchase.

Keep in mind that filling out a quote form will get you phone calls and emails from several providers.

This is a good thing if you are shopping for multiple quotes.

View Rates

#6 Quicken Loans

Quicken Loans is an online-only loan provider.

They do a lot of volume and have a very efficient process in place. I recommend contacting them if you are pressed for time.

#7 Wells Fargo

One of the largest banks in the U.S. is also one of the largest VA loan providers.

They are a great option if you prefer to handle the buying process in-person. Their loan rates are generally competitive.

They are also a full-service bank, which is nice if you like to take out your mortgage with your bank.

#8 JG Wentworth

They are among the best lenders for refinancing your home loan. Their process is quick and easy, and they handle most of the loan-servicing in house.

#9 LoanDepot

That’s not a typo, as the “l” in loanDepot is lowercase. loanDepot is the nation’s fifth-largest retail mortgage originator and a top 10 VA Loan originator.

They have a “No Steering” Bias Policy, which basically means they will recommend the best mortgage for your situation, not the one that puts the most money in their coffers.

#10 Your Local Lender

I always recommend homebuyers check with a local lender before finalizing their home purchase.

Ask your real estate agent or homebuilder if they have any recommendations.

Local lenders will always work hard to earn your business and will often do their best to get you a super-competitive rate.

VA Loan Rates

VA Loan rates will vary by many factors, including the lender, your credit history and score, your income, debt to income ratio, price of your home, down payment amount (if any), local factors, and possibly other factors.

Loan rates can also vary day to day, based on economic factors.

In short, it’s always a good idea to compare several lenders before choosing your VA Loan company.

When I am getting VA Loan interest rate quotes, I create a spreadsheet to track the lender and loan terms, such as duration (15 year vs. 30 year mortgage), interest rate, closing costs, cost of points (if any), and other factors. This helps me track the best overall offer.

I recommend getting at least 3-5 quotes before choosing your lender. However, it’s not a bad idea to get a few more quotes if you have the time and patience. I checked VA Loan rates with 7 lenders before deciding to go with Veterans United for my most recent mortgage.

The post VA Home Loans appeared first on Good Financial Cents®.

Source Good Financial Cents® http://bit.ly/2WOIVdZ