What to Know about Veteran Administration Loans

Veteran administration loans commonly referred to as VA loans are one of the most common types used in the financing market today. They normally offer a lot of benefits to those who are eligible and are used mainly to refinance, improve or buy homes. The following are some of the important things for you to know before you apply for these loans

It is normally guarantees

These type of loans are usually guaranteed by the veterans affairs department meaning the lender providing financing to a borrower is protected against any loss should the buyer fail to repay the loan they offer.loans

Not everybody is eligible for these loans

To qualify for VA loans, you need to be an active duty service personnel or a veteran. Veterans may apply for these loans with any mortgage lenders who participate in the VA home financing program, and a valid eligibility certificate has to be presented along with the income requirements and credit to qualify for such loans.

Offers flexible credit guidelines

The minimum credit score for such loan is 620, but depending on some unique circumstances, some lenders can accept a credit score of up to 550. Although other types of loans may also offer the same credit score guidelines, they tend to have more obligations to the borrower and require a larger down payment than the VA loans.

Offer lower than usual rates

With such loans, borrowers normally receive lower interest rates than the other types of loan. VA loans may also be used for obtaining lower refinances rates up to 100% loan to value.

No need for private mortgage insurance

With VA loans you do not require private mortgage insurance and such programs can be used in eliminating private mortgage insurance. For instance, you can refinance your existing loan by changing the program to VA loan thereby eliminating the PMI and lowering your monthly mortgage repayment. VA loans, however, charge funding fee to issue the guarantee to lenders against borrowers’ default on mortgages.

They do not need down payment

downpaymentNormally VA loans do not require down payments. However, if the amount of loan exceed the limit of VA for the county where your property is located, you will have to come up with some down payments. These payments vary depending on your remaining VA entitlement amount and the appraised value or purchase price of your home.

These are some of the vital things that everyone needs to know before they can apply for veterans administration loans.