Everything You Need to Know About VA Loans

VA loans are reserved for military service members, veterans, and their spouses. If you are entitled to military benefits because of your service or your spouse’s service, VA loans come with lots of benefits, including a no down payment option.

If you are not entitled to military benefits, you’ll want to consider other funding options like conventional loans or FHA loans.   

In this article, we’re going to explain the details of VA loans:

  • What is a VA loan?

  • Who qualifies for a VA loan?

  • And the pros and cons of VA loans.

Here’s everything you need to know about VA loans!

What is a VA Loan?

A VA loan is a home loan that is backed by the US Department of Veterans Affairs. This means that the VA guarantees your lender that you will repay your loan. If you don’t pay, the VA will make sure the lender is compensated up to a certain amount. This guarantee means that lenders are willing to offer more favorable loan terms, like 0% down payments, no private mortgage insurance, and relaxed credit score requirements.

So even if you have a few negatives on your credit report and no money for a down payment, you could still become a homeowner now through your military benefits from the VA!

Who is Eligible for a VA Loan?

Each lender has its own requirements for VA loan eligibility (within legal guidelines). But, generally, lenders are looking for:

  • Military service members, veterans, and spouses. You’ll need an “entitlement” from the VA to confirm your military relationship.

  • Reasonable credit. Lenders want to see a score of around 620. The higher your credit score, the better your interest rate could be.

  • A reasonable debt-to-income ratio (DTI). Lenders want to make sure you can cover all your expenses with your new home loan. So they want to see all your debt payment (student loans, credit cards, auto loans, etc plus the new home loan) stay under 41 percent of your pre-tax income.

Because the VA is backing your loan, they want to make sure the property is in reasonably good condition. So the property you choose will need to meet the VA’s minimum property requirements.

Pros and Cons of VA Loans

VA loan pros:

  • You could buy a home with no money down!

  • There is no PMI (private mortgage insurance) required.

  • There are no income limits, so you can get a VA loan no matter how much money your household makes.

VA loan cons:

  • There is a VA loan funding fee, typically around 1.65 percent of the loan amount. But this fee can be rolled into your loan, so you don’t have to pay it out of pocket at closing.

  • VA loans can only be used for your primary residence. You can’t use a VA loan for income properties or vacation homes. However, you can get a multi-family property of up to four units, as long as you live in one of the units. This is a great option for military members and veterans who want to invest in income-producing properties.

  • There are limits on how much you can borrow with a VA loan. But the limits are generous, and won’t restrict most homebuyers.

  • Some sellers might hesitate to accept your offer with VA financing because they may need to do extra work to make the house meet the VA’s property standards.

We’re Here to Help!

At Sequoia Real Estate, we specialize in making your real estate transactions as smooth and enjoyable as possible. This includes helping you get pre-approved for a home loan with a reputable lender, which will tell you how much money you can borrow.

Don’t wait another day to start your home search. Contact us for a friendly, no-obligation consultation today!