For many veterans and active military members, owning a home is a key part of the American dream. To help facilitate this, the U.S. Department of Veterans Affairs (VA) offers VA loans, a type of mortgage with significant benefits. Read on as we delve into what VA loans are, their advantages, and how to determine if you're eligible.
What Is a VA Loan?
A VA loan is a mortgage loan guaranteed by the Department of Veterans Affairs. The program is for American veterans, military members currently serving in the U.S. military, reservists, and select surviving spouses (provided they do not remarry) and offers several advantages over traditional mortgages.
Key Benefits of VA Loans:
No Down Payment Required
One of the most significant benefits of a VA loan is that it doesn’t typically require a down payment. For many veterans, this makes homeownership more accessible, as saving for a large down payment can often be a barrier to buying a home.
No Private Mortgage Insurance (PMI)
With most Conventional loans, borrowers who put down less than 20% are required to purchase private mortgage insurance (PMI), adding to the monthly cost of the mortgage. VA loans do not have this requirement, potentially saving homeowners hundreds of dollars a month.
Competitive Interest Rates
VA loans often have lower interest rates compared to traditional mortgage options. This is because the VA backs a portion of each loan, giving lenders a greater degree of flexibility.
Limited Closing Costs
The VA limits the closing costs lenders can charge to VA loan applicants. This regulation helps to keep the loan affordable.
No Prepayment Penalty
VA loans do not have prepayment penalties, meaning you can pay off your loan early without incurring extra fees.
To be eligible for a VA loan, you must be one of the following:
- A veteran with a certain number of days of active service
- An active-duty service member
- A member of the National Guard or Reserves with a specified period of service
- A surviving spouse of a service member who died in the line of duty or as a result of a service-related disability
How to Apply for a VA Loan:
The first step is to obtain a Certificate of Eligibility (COE) from the VA, which proves to lenders that you meet the necessary service requirements. Once you have your COE, you can apply for a VA loan through a VA-approved lender like Tidewater Home Funding.
VA loans offer a fantastic opportunity for veterans and their families to own a home without some of the financial burdens that come with traditional mortgages. With no down payment, no PMI, and competitive interest rates, it’s an option worth exploring for those who have served our country.