Buying a home is everyone’s dream; being a veteran is no exception. However, for having served the country in the best way, the country gives veterans and their surviving spouses, the best mortgage available. In fact, it is designed exclusively for them – the VA loan.
Paying up the down payment is one of the major things that make many put off their home buying decisions. But with a VA loan, you don’t have to make any down payment for your house. The best part is that there is no requirement to pay private mortgage insurance even.
Most veterans find it difficult to understand the VA loan requirements since VA loans are very different from conventional mortgages. As a result, real estate agents direct them towards other home-buying programs, which help the agents make some money. Knowing about VA loans is very essential for every veteran who wishes to buy a home.
A VA lender who contacts prospects like you, through VA leads, may or may not clarify your questions about VA loans. Nevertheless, here are a few things you need to know before you apply for a VA loan:
Minimum credit score requirement for VA loans
VA loan is not exactly granted by the United States department of Veteran Affairs (VA). Only a portion of that loan is guaranteed by the authority. As a result, the VA doesn’t specify any minimum credit score requirement for VA loans. That is left to the VA-approved lenders. The good news however, is that the lenders tend to be lenient with credit score requirements when it comes to VA loans, since they come with a government guarantee.
While you may need a credit score of 740 or higher for a conventional loan, you can get a VA loan for a credit score as low as 620, without putting in any down payment. However, the lender might consider your ability to repay your loan, before approving your VA loan application. A debt-to-income (DTI) ratio of 41 percent or less is one of the criteria for a VA loan. However, you can still qualify for one, if you can manage to prove what is known as “compensating factors.”
Closing costs for VA loan
The closing costs that you might have to pay for your VA loan might vary from one lender to the other. It also depends on the type of home you are buying and various other factors. However, you can be prepared to spend anywhere between 1 and 5 percent of the loan amount.
Unlike conventional mortgages VA loans do not finance closing costs of your mortgage. Nevertheless, there is a provision for someone else to pay them on your behalf, in case you don’t have the cash resources. If you are trying to look for a VA lender through VA leads, make it a point to speak to him about how to deal with closing costs.
Apart from the above, there is one more thing you need to know about VA loans. VA loans are available only for homes that are occupied as primary residences. However, you get 60 days of time from the date of closing to take occupancy. This period can be extended up to a year under extenuating circumstances.