In honor of Veteran’s day, we wanted to show our support for the many ladies and gentlemen that so bravely risked their lives for this great country by discussing one of the least utilized benefits that veterans have, which is the veterans loan (or VA loan). Out of our nearly 22 million veterans living in the United States, it is estimated that only 10 percent take advantage of this program that is exclusively available for veterans to use when purchasing a home. When surveyed to determine why more veterans did not take advantage of this program, it was discovered that around 33 percent of veterans did not know about this loan. Many veterans believe that a FHA loan would just be easier to obtain, but it is worth exploring a VA loan first. With a VA loan, you could have the option to put zero down, avoid paying private mortgage insurance completely and closing costs are usually minimal. Sound too good to be true? Read on to see if you can get a VA loan on Cap Cod to purchase your future home. Make sure to also read our Guide to Buying a Cape Cod Home.
What is a VA Loan?
The VA loan is not an actual loan, it works just as the FHA (Federal Housing Administration). The United States Department of Veteran’s Affairs basically vouches for veterans who are approved for the loan. An approval for the veterans loan guarantees mortgage lenders that if this person defaults on their loan, the department will pay for up to 50% of the loan balance. Due to this guarantee, lenders tend to relax their rules when it comes to credit requirements and household income requirements. If you qualify for a VA loan on Cape Cod, you can buy a home or condo, build a home, buy and finance repairs on the home, or buy a lot.
Is it Difficult to Qualify for a VA Loan on Cape Cod?
While it is true that there are additional steps to obtaining a VA loan on Cape Cod, it is not that much more difficult to acquire than a standard FHA loan. If you work with the right lender, the process is fairly straightforward. To be considered for a VA loan, at least one of the following questions must be true for you:
- For 90 consecutive days were you on active duty during wartime?
- During peacetime, have you served a minimum of 181 days active duty?
- For more than 6 years, have you served in the National Guard or Reserves?
- Are you a widow or widower whose partner died either in active duty or as a result of an injury or disability that occurred while serving?
What are the Advantages of a VA Loan?
The biggest advantage of obtaining a VA loan on Cape Cod is the fact that you do not need to make a down payment on the property. If you were to get a FHA loan or conventional loan, and planned on putting down less than 20 percent of the purchase price, you would have to pay for private mortgage insurance or a mortgage insurance premium. Private mortgage insurance and a mortgage insurance premium are both mortgage insurance under different names. For a FHA loan, you would purchase a mortgage insurance premium, and for a conventional loan, you would pay private mortgage insurance. This insurance protects the lender if the loan is not paid, because the owner defaults. The VA loan has the United States Department of Veteran Affairs backing your loan, so you do not have to pay for an additional insurance that your mortgage would be paid.
Since most home buyers can not come up with the 20 percent to put down on their home, and need to pay for the private mortgage insurance, they pay a lot more per month on their mortgage payment than someone who has a VA loan. In order to qualify for a FHA mortgage product, one must put a down payment on their home of at least 3.5 percent and the cost of their mortgage insurance averages 0.85 percent per year. By getting a VA loan on Cape Cod, you save yourself the 3.5 percent down payment and about 0.85 percent annually. More benefits to a VA loan instead of a conventional or FHA mortgage are lower closing costs and there is no penalty for prepayment of your loan.
How to Get a VA Loan
Just as with any mortgage product, you want to pay close attention to your credit score. To qualify for a VA loan on Cape Cod, you will need “suitable credit.” While this is vague, it is best to get an idea of what your credit score is before applying for this loan. If you are unsure of your credit score, call your credit card company for a free copy or check out free services such as Credit Karma to give you an idea of your score. If your credit score is low, check out our blog “Clean Up Your Credit Before You Buy.”
Another factor that is considered is whether you would be able to cover your mortgage payments in addition to any other expenses you incur such as car payments, and utilities.The property you are purchasing must be your residence, not an income property that you plan to rent to the public. When applying for the loan, you will have to present your VA Certificate of Eligibility. If you go to a VA approved lender, it is easy enough for them to get your certificate on the benefits page of the Veterans Affairs website. It is a good idea to shop around lenders to find a mortgage product that works best for you. Typically, veterans have a difficult time securing a loan because of guidelines that a specific lender puts on the mortgage. If you shop around for the most straightforward loan, you will benefit in the long run.
Are you Eligible for a VA Loan on Cape Cod to Finance Your Mortgage?
A VA loan may seem too good to be true, but it is within reach for a lot of veterans. Speak to your local VA approved lender to see if you’re one of the many veterans that qualify for this special program for our brave men and women that sacrificed so much for our freedom. Take advantage of the lower monthly mortgage payments, zero percent down and low closing costs and find out if you qualify today!