VA Mortgages 101

In our last blog post wrapping up our home mortgage series, we will be discussing the VA loan. The VA loan is a home mortgage granted to eligible buyers who have met specific service requirements in the United States military. The VA loan also allows an extension to eligible spouses of veterans as well. There are many perks to choosing a VA loan so let’s dive into the details.

When compared to a standard conventional mortgage, VA loans are often more cost-effective than conventional loans. The VA loan does not require a minimum down payment, in fact you are not required to put a down payment for a property. In our last blog post, we noted that the conventional loan has a minimum down payment ranging anywhere from 3%-5% minimum down. Like the FHA loan, VA loans are only eligible for primary residences. As a result, vacation homes, second homes, and rental properties are not eligible for VA loan. The conventional mortgage would be the preferred option for those properties.

Unlike conventional and FHA mortgages, the VA loan does not require private mortgage insurance. Although the VA loan requires an up-front PMI similar to other mortgage options, the VA does not require the monthly payment allowing the borrower greater flexibility in their cash. The VA also requires a “funding-fee” that is tacked on up-front on the mortgage at initiation. This fee can be paid in cash at the beginning or financed into the loan if eligible.

The VA sets no minimum credit score, but this typically has an overwrite from lenders who may require a minimum credit score and this is usually the norm, not the exception. Common minimum credit scores range from 580-620. Furthermore, the VA loan typically offers lower credit scores than an FHA or Conventional loan.

In conclusion, the VA loan presents a highly favorable option for eligible buyers who have served in the United States military and their spouses. With its cost-effectiveness, lack of mandatory down payments, and exemption from private mortgage insurance, the VA loan stands as a competitive choice when compared to other mortgage options. As we wrap up our discussion on home mortgages, we hope this information has provided valuable insights in order to make the best decision possible when purchasing a home.