A couple weeks ago, I wrote about the upcoming FHA loan insurer increase. While the premiums have increased, an FHA insured loan is still a good option for home buyers. However, if you qualify, there is a better option. The VA loan is a mortgage loan backed by the U.S. Department of Veteran Affairs. The VA loan is similar to the FHA with a few added perks, if you’re qualified.
Qualifications for VA:
- Wartime / Conflict veterans who served at least 90 days consecutively and were not dishonorably discharged
- Peacetime service of at least 181 days of continuous active duty service and not dishonorably discharged
- Enlisted veterans whose service began after September 7, 1980, or officers whose service began after October 16, 1981, must normally have served at least two years.
- Reserve & National Guard members who have completed six years of service and have been honorably discharged (or are still serving) may be eligible for a VA loan.
- There are additional qualifications, so if you think you may qualify, contact your regional Veterans Administration office.
VA insured loans offer some advantages over FHA:
- VA loans do not require a down payment, where FHA requires a minimum of 3%
- VA loans allow 100% financing without private mortgage insurance
- VA allows seller to pay up to 4% of closing costs
- Though VA does not have a maximum sales price, typically they are insured up to $250,000. Though this varies from county to county. The number may also be higher in some high priced areas of the country.
- No prepayment penalties
- Interest rates aligned competitively
The one disadvantage is the VA funding fee, but this may also be financed. Alternatively, this fee may be lowered with a down payment of at least 5%
If you are planning to take advantage of the Homebuyer’s tax credit, you’ve probably already made your decision on what type of loan (if any) you’d be using. It’s always good to shop around! VA loans are excellent if you are eligible, but do not dismiss FHA and conventional loans until you’ve run the numbers for yourself.