As the financial crisis gets further behind us, mortgage options get more flexible. One loan program that’s often overlooked is a VA loan. If you’ve served in the U.S. military, you can get a loan backed by the U.S. Department of Veterans Affairs (VA) with no down payment.
This may be a surprise: VA loans aren’t actually made by the VA. They are made by mortgage lenders, and the VA backs the loans, which enables lenders to be more flexible when making these loans.
Features of VA mortgages include:
It’s important to work with a VA loan specialist so they are familiar with the criteria of who exactly qualifies for VA loans. To be eligible for a VA loan, you must be one of the following:
If you’re in any of these categories, you can search for VA lenders to help you find a loan.
You will, however, need to provide your lender with a Certificate of Eligibility (COE) to verify that you’re eligible for a VA loan. The COEs for each category of eligible VA borrower have different requirements.
An expert VA lender can also help you obtain the correct COE based on your circumstances. If you fall into one of the eligible categories but don’t know how to get your COE, ask a lender to help you.
Getting your VA loan approved is mostly the same as getting a non-VA loan approved. A lender will calculate your total proposed monthly housing cost plus all other monthly debt — like payments on credit cards, cars, and student loans — and compare it to your income. They’ll want to see that these total monthly costs don’t exceed 43 percent of your monthly income.
Lenders will also look at your credit scores. Each lender will vary in terms of the credit score they require, but generally a score of 620 or better is required to qualify for a VA loan.
If you’re buying a condo, the VA must approve the condo project. The agency maintains a database of pre-approved condos, and if the condo you want isn’t on this list, you’ll need to work with your lender to get the condo approved.
This can add considerable time to the transaction, so make sure you do this research before writing an offer. And make sure your real estate agent is aware you’re getting a VA loan.
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