VA Loan Tips
Landing the perfect home is part of the American Dream. A VA loan can help you purchase the home that you’ve always wanted. San Marcos is an ideal location for veterans, according to the Greater San Marcos Partnership. Use these tips to secure a VA loan and settle down in Central Texas.
Advantages of a VA Loan
If you’re a veteran, you have the opportunity to finance 100 percent of your home’s purchase price with a VA loan. Even though no down payment is required, you typically don’t have to pay mortgage insurance. Conventional loans usually require you to pay mortgage insurance if you don’t put at least 20 percent down.
VA loans tend to have the lowest interest rates of any mortgage. You’re not penalized if you decide to pay the loan off early. If you don’t qualify for a conventional mortgage because of a high debt-to-income ratio, you still may be eligible for a VA loan. According to the U.S. Department of Veteran Affairs, the debt-to-income ratio necessary to qualify for a VA loan is 41 percent.
Disadvantages of a VA Loan
One of the main disadvantages of a VA loan is the funding fee. This fee is charged to cover losses if the loan goes into default. If you combine the funding fee with your loan, you’ll pay it off during the term of your mortgage, and it won’t impact your checkbook as much as if you pay it as a lump sum. Every time you use your VA loan benefits, the funding fee gets more expensive.
Some homebuyers qualify for an exemption or refund, however. Some disabled military members or veterans don’t have to pay the fee. Your Certificate of Eligibility should specify whether you can have the funding fee waived.
Tips to Qualify for a VA Loan
A VA loan can only be approved if you have a VA certificate of eligibility. However, you don’t have to get the certificate before starting the application process. You can often start the prequalification process first.
If you have been an active-duty veteran who has served for at least 90 days during wars and 181 consecutive days during peacetime, you may qualify for a VA loan. Service doesn’t automatically qualify you to receive a loan, however. You must also meet certain income and credit requirements.
Lenders will look at your debt-to-income ratio and credit report to determine whether they can give you a VA loan. Checking your credit report for errors can be a good place to begin. Paying off debt can reduce your debt-to-income ratio and enhance your eligibility. If you can’t do that, you might want to think about asking your legally married spouse or an unmarried military member to co-sign on the loan.
You need to show proof of income to qualify for a VA loan. Lenders look for consistent employment with few gaps. If you’re retired, you’ll need to show retirement income from the past two years and prove that it is likely to continue for the next three years.
If you’re shopping for a home, make sure that your lender is savvy about VA loans. Professionals who understand the value of the program will help steer you to the best properties and save you time and money.