When consumers are looking for ways to apply for and find an affordable mortgage, one type of home loan they may come across comes from the U.S. Department of Veterans Affairs. Often referred to as VA loans, they can provide borrowers with significant benefits – such as no down payment requirement – as long as consumers meet a number of qualification standards.
First and most obviously, the vast majority of military members past and present – including reservists and those in the National Guard – are able to get loans through the VA, according to Bankrate. This allowance is also extended to spouses of military members who died on active duty or due to disabilities they received at that time. However, VA loans are only open to people who were in the military for at least 181 of service; that means about six months for most military members, but the number rises to to as much as six months for reservists and National Guard members.
However, that time requirement drops to just 90 days if they serve on foreign soil, the report said,.
A look at the benefits
Above and beyond the lack of down payment requirement, people obtaining VA loans also don't have to pay for private mortgage insurance, which is typically required for any home loan with a down payment of less than 20 percent, according to VAloans.com. About 90 percent of all people who obtain VA loans take advantage of the no-down-payment requirement, but experts recommend making a down payment of at least 5 percent, as a means of reducing fees.
For instance, the VA Funding Fee charges people making small down payments 2.15 percent of the value of the mortgage, but with a 5 percent down payment or more, that fee drops to 1.5 percent, the report said. After that, a down payment of at least 10 percent will further reduce the funding fee.
In addition, like many other types of mortgage, people using VA loans are allowed to put financial gifts from those close to them toward that down payment as a means of reducing their own costs, the report said.
Understanding the issue
It's important to note that VA loans are obtained through private lenders, not the VA itself, according to the Veterans United Network. This makes them similar to loans backed by the Federal Housing Administration or the U.S. Department of Agriculture: They are simply backed by the federal government in a way that insulates lenders from risk to the point that they can be offered for little or no down payment.
However, the "guaranty" from the VA is often capped at a certain amount, meaning a veteran typically wouldn't be able to use a VA loan on a mansion, the report said. The maximum amount the VA will back varies by region, so would-be borrowers will have to look into what that limit is based on where they're looking to buy
When military members – or anyone else – are looking for ways to make their mortgages affordable, it's vital that they do as much research as possible to find a deal that works for them.
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