Michaela Phillips, Guaranteed Rate, Inc.

Michaela Phillips,
Guaranteed Rate, Inc.

In the world of real estate, VA loans sometimes get a bad rap. However, there’s no reason for this unfavorable reputation. In fact, VA loans are often beneficial to both seller and buyer.

What are VA loans?
VA loans are also known as Veteran Affairs mortgages. They’re a type of mortgage that is available to both military veterans and active military members. The loans are backed by the Department of Veteran’s Affairs and available through private lenders.

To be eligible for this type of loan, you need to be a member of the military, a veteran, in the reserves, or in the National Guard. Widows of someone who died while on active duty or from a disability that was related to their military service can also apply.

There are limits to how long you must be in the military before eligibility. Active-duty members are eligible after 6 months of service while those in the reserves and the National Guard are eligible after 6 years. However, if they’re called into active duty, they become eligible after 181 days. During times of war, most people become eligible after 90 days of service.

To apply, prospective homeowners must submit a Certificate of Eligibility that validates their service. This can be submitted online.

How do they differ from conventional loans?
VA loans have different qualifications and risk factors than FHA or conventional loans. One of the biggest differences is down payment: while many loans involve a down payment of 20%, VA loans don’t require anything. The lack of a down payment benefits the buyer, of course, but it benefits the seller, as well. If an appraisal comes in lower than expected, the person using a VA loan may be better able to come up with the funds to bridge the gap between the value and the asking price.

Another difference is the cap: the VA doesn’t set a cap on the loan amount. You can secure a jumbo loan without putting down 20%. This opens the door for more buyers, allowing a greater number of active and retired military members to become homeowners.

Other benefits of VA loans
VA loans have other benefits, too. The 30-year fixed rates are lower than traditional loans and the waiting period after a bankruptcy, foreclosure, or short sale is only two years. The VA program won’t deny you based on a low credit score, either; they’re more concerned with the last twelve months of credit history. And there’s a future benefit, as well: the VA Streamline Refinance Loan allows you to refinance without having to requalify for the program.

Past and present members with a service-related disability may save even more. Lenders often waive the funding fee, minimizing the closing costs.

If you’re a former or acting serviceman or woman, a VA loan may be right for you.

Michaela Phillips is the Vice President of Mortgage Lending at Guaranteed Rate, Inc. Contact Michaela at 303.579.5517, e-mail michaela@michaelaphillips.com or visit michaelaphillips.com. NMLS:312874.