This guide covers VA loans versus other loan programs. What does it take to get VA home loan approval? What are the benefits of VA loans versus other loan programs. Difference between VA loans versus other loan programs is you must first be eligible. Only service members, honorably-discharged veterans and sometimes their families are eligible.
VA loans, backed by the U.S. Department of Veterans Affairs, are specifically designed to help active-duty service members, veterans, and eligible surviving spouses purchase, refinance, or improve a home.
VA loans versus other loan programs is the underwriting guidelines are flexible. VA loans versus other loan programs is there is nonminimum credit score requiremetns on VA loans. The is no minimum down payment. However, you must be able to afford your loan and have no serious recent credit problems. The VA mortgage program is an earned benefit for members of the US military. It’s one of the best mortgage programs available. In the following paragraphs, we will cover VA loans versus other loan programs.
Prequalify for a VA home loan in about five minutes.
Comparing VA Loans Versus Other Loan Programs
VA loans are exclusively available to veterans, active-duty service members, certain members of the National Guard and Reserves, and eligible surviving spouses. Other loan programs may have different eligibility criteria, such as FHA loans which are available to a broader range of borrowers. One of the significant advantages of VA loans is that they typically require no down payment for qualified borrowers, making homeownership more accessible for veterans and active-duty service members. Conventional loans often require a down payment of at least 3-5%, and FHA loans require a minimum down payment of 3.5%.
VA Loans Versus Other Loan Programs: VA Funding Fee
One difference between VA loans versus other loan programs is the VA funding fee. One of the requirements for a VA home loan is the funding fee. VA mortgages don’t require mortgage insurance even with zero down. However, the funding fee provides the same coverage as a mortgage insurance policy.
Interest rates for VA loans can be competitive with other loan programs. However, rates can vary depending on market conditions, lender policies, and individual borrower qualifications. It’s essential for borrowers to shop around and compare rates from different lenders.
The difference with VA is that you pay the insurance upfront instead of in monthly installments. Because you’re not adding mortgage insurance to your monthly payment, you can afford to get a bigger mortgage and buy a better house. VA loans do not require private mortgage insurance (PMI), which can substantially reduce the overall cost of the loan. In contrast, FHA loans require both an upfront mortgage insurance premium (UFMIP) and annual mortgage insurance premiums (MIP) for most borrowers who put less than 10% down. Conventional loans may require PMI if the down payment is less than 20%.
Property Requirements on VA Loans Versus Other Loan Programs
VA loans have specific property requirements, including the property being the borrower’s primary residence and meeting minimum property standards. FHA loans also have property requirements, but they are generally more lenient compared to VA loans. Conventional loans may have stricter property standards, particularly for appraisal and inspection requirements.
Closing Costs on VA Loans
You don’t have to pay the funding fee out of pocket if you don’t want to. Instead, you can add it to your loan amount. The cost of the VA funding fee depends on several factors:
- Down payment (10%, 5% or 0%)
- Loan type
- Use (first-time or subsequent)
The table below shows the different funding fees. Note that disabled military veterans may qualify to have the fee waived. VA loans limit the amount veterans can be charged for closing costs, and the seller can contribute up to 4% of the home’s value towards the veteran’s closing costs. Other loan programs may have different rules regarding allowable closing costs and seller contributions.
VA Loans Versus Other Loan Programs: Debt-to-Income Ratio
The VA allows mortgage lenders to qualify borrowers with a higher debt-to-income ratio (DTI) if they meet residual income requirements. That’s often a more generous way to underwrite borrower income. VA-approved mortgage lenders often impose stricter requirements than the VA does. These overlays often limit a borrower’s DTI to 41% or lower. While lenders without overlays, like Gustan Cho Associates, may close loans with DTIs as high as 60% for highly qualified applicants.
VA Minimum Credit Score
Credit Requirements: VA loans tend to be more flexible with credit requirements compared to conventional loans. While there’s no set minimum credit score for VA loans, lenders typically look for a score of at least 620. FHA loans may accept borrowers with lower credit scores, sometimes as low as 500 with a zero% down payment with discount points or 580 with no discount points. Conventional loans generally require higher credit scores, typically around 620-640 or higher. The VA has set no minimum credit score for loan approval. However, that does not mean you’ll achieve loan approval if your recent credit history looks like a rap sheet. VA mortgage credit underwriting guidelines say:
In circumstances not involving bankruptcy, satisfactory credit is generally considered to be re-established after the borrower(s), have made satisfactory payments for 12 months after the date the last derogatory credit item was satisfied.
If a credit report reveals numerous unpaid collections or accounts that are not being paid timely, including some which have been outstanding for many years, then once the borrower has satisfied the obligations, and then makes timely payments on subsequent obligations for at least 12 months, satisfactory credit is considered re-established. Click here to qualify for VA Loans with low credit score
Ask an Expert on VA Loans Versus Other Loan Programs
In summary, VA loans offer unique benefits for eligible military personnel and veterans, including no down payment, no PMI, and flexible credit requirements. However, it’s essential for borrowers to compare VA loans with other loan programs to determine which option best suits their individual needs and financial situation.
The Gustan Cho Team at Gustan Cho Associates does not have any overlays on VA Loans. Gustan Cho Associates Mortgage Group is nationally known for closing VA Loans With No Overlays in 21 days or less.
Borrowers with any questions on qualifying for a VA Loan, feel free to contact us. Gustan Cho Associates is a five-star national VA lender. We pride ourselves on 21-day closings. We impose no overlays on all government loan programs or conventional loans. Reach out to us at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.
