Many veterans, service members, and military families planning to buy a home choose a VA loan as their financing option. There are many reasons to do this. Since it is partially backed or guaranteed by the Department of Veterans Affairs, it is considered the most powerful lending program available for military borrowers. It also offers flexible, zero-dollar payments.
Despite the VA loan being available since 1944, even the most seasoned VA borrowers and real estate agents don’t fully understand the program. Keep reading to figure out how it actually works and learn more about the facts you need to know about it before applying.
How Does a VA Loan Work?
VA loans are backed or guaranteed by the government. This backing or guarantee allows private lenders to offer borrowers a zero-dollar down payment and other favorable terms and rates.
As for the loan process, borrowers have to get prequalified first. It provides an estimated amount of how much one can afford based on their financial factors. Next, they have to get preapproved to prove to home sellers and real estate agents that they are serious about buying a home.
After loan pre-approval, it’s time to put in an offer once borrowers found the perfect home. They then have to go through the VA appraisal and underwriting process to ensure their desired property complies with the VA’s minimum property standards and fair market value. Once everything checks out, they can move on to the loan closing.
What Are the VA Loan Facts That Most Borrowers Don’t Know?
A VA loan has a straightforward process, but many potential borrowers and agents don’t completely know about the program’s unique perks. Here are some facts about it that you should know:
- They Are Available Only for Certain Types of Homes. Not all types of homes are available for VA borrowers. Only those properties like single-family homes, modular housing, condos, some multi-unit properties, and those in a move-in-ready condition are allowed. This means that you should explore other options if you are planning to buy a fixer-upper, working farm, or downtown deli.
- They Are Only for Primary Residences. VA loans are only for primary residences. They can also be used to buy multi-unit or duplex properties if you live in one of those units. If you want to buy a vacation home or an investment property, check other financing options.
- They Don’t Have Mortgage Insurance. Unlike other programs, VA loans don’t have mortgage insurance. This is a monthly fee required for borrowers who don’t put at least a 20-percent down payment. Since you won’t have to pay mortgage insurance premiums, you can save even more money monthly.
- They Have a Mandatory Fee. VA borrowers don’t need to pay mortgage insurance, but they must pay for the VA funding fee. It is required for purchase and finance loans to help keep the loan program going.
Your VA Loan Specialist in Los Angeles: Shannon Christenot
Eligible borrowers can secure a VA loan to buy their dream home or refinance an existing mortgage. Since it comes with no down payment and offers competitive rates and terms, service members can finally buy their primary residence even with little money in their pockets. If you think this financing option is right for you, reach out to a mortgage company.
I understand that figuring out if you are eligible for a VA loan on your own can be tricky. Don’t worry because I can guide you throughout the entire application process. I am Shannon Christenot, a mortgage lender in Los Angeles. Contact me today at (818) 601-2231 for a free mortgage rate quote!