Contrary to what many Americans think, this is a great time for the military to refinance or buy a home. With mortgage rates continuing to soar at record highs and many homes selling for significantly reduced prices, it is possible for those with good credit and good income to purchase a large home.
One of the unique benefits granted to military personnel is access to the Veterans Affairs Residential Mortgage Program. This program offers enormous mortgage benefits to active duty military personnel, veterans and some surviving spouses. A VA home loan can be used for many purposes, including buying or building a new home, refinancing a current mortgage, repairing or improving your existing home, or installing home improvement measures. energetic efficiency.
While a conventional loan might seem like a good deal due to a lower advertised rate, keep in mind that you often need a high credit score of 720 or higher to qualify for these better rates. VA home loans are government guaranteed, which means banks can take less risk with the loan and possibly price it lower than a rate you would be entitled to from a bank. But even without a lower rate, there are a number of other compelling benefits that make the VA home loan program a better overall alternative.
Benefits of the program
- The VA program will not turn down a loan solely on the basis of a low credit score, and most lenders do not scale interest rates for better scores. The VA program typically only considers the last 12 months of credit history, unless a bankruptcy, tax lien, or collection situation is factored into your situation.
- The VA mortgage does not require a down payment. This can save consumers up to 20% of the loan value compared to a conventional loan.
- Borrowers can often refinance at a lower rate under the VA program without re-qualifying for the program through the VA Streamline refinance loan.
- If the borrower has a service-related disability, they may be eligible for the lender to waive finance charges, further reducing closing costs.
Start the process
You can begin the application process with any lender that offers a VA home loan. At some point, you will need to obtain an eligibility certificate. This document will verify that you are qualified for the program and describe your level of benefits. Prospective borrowers can apply online for the program and get their COE.
Once you’ve determined your eligibility, you can go ahead with the home buying process. This usually involves finding a VA approved lender (if you haven’t already), pre-qualifying for a loan, choosing a home, having it appraised, and then closing the loan and the property.
- Be sure to review your credit report before you begin the process to correct any errors. Your lender will use it to make a decision about your eligibility and interest rate, so be sure to do your best. You can request a free copy at www.annualcreditreport.com. You should also check your credit score so you know what range you are in before talking to a lender.
- With interest rates at their lowest, it makes sense to consider all of your options. Military personnel who will be in a home for a short time may want to consider an adjustable rate mortgage to keep payments as low as possible. For those with additional disposable income, plan to stay in their home for a long time and can afford a slightly higher monthly payment; it makes sense to consider a 15 year fixed term loan. This will help you pay off your loan faster and save money on the total interest paid on the loan.
- It also makes sense to get your loan amount pre-approved so you know what range of home you can afford. This will save an immeasurable amount of time and stress in your home search. It will also give you credibility when dealing with sellers who know you are pre-approved for that dollar amount.
The first step
The first step, before you even complete a loan application, is to see if you qualify for a VA mortgage and get quotes from multiple lenders. From there, you can select a lender who will walk you through the application, purchase process, and closing.
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