How does your VA mortgage benefits work on a mortgage?

This articles explains your VA mortgage benefits.  First all, a VA mortgage has several advantanges over a regular Conventional loan or even an FHA loan.  There are two biggest advantages. One is there is no down payment requirement.  The second is no monthly mortgage insurance.  These two benefits are huge.  Down payment money is the biggest obstacle for most first time home buyers.   What is mortgage insurance premium?  It’s a monthly fee that gets added to your loan.  This monthly mortgage insurance premium amount is pretty hefty.  However, the higher your down payment percentage the lower your monthly mortgage insurance premium.  The problem is most home owners only put 3%-3.5% down.  That translates into a very high monthly mortgage insurance premium.  VA loans however, do not require any monthly mortgage insurance.  This savings is huge.  We can expect borrowers to save anywhere from $100 or more per month depending upon the loan size.

VA Mortgage Rates:

VA mortgage rates tend to be lower than a Conventional mortgage loan.  Why?  Because the US Government is backing them.  As a military member this is one of your perks.  You served our country now the government offers you a lower mortgage interest rate compared to a regular conventional loan.  They also do not charge you any down payment or mortgage insurance premium.  When you combine those three reasons, a lower mortgage rate, no down payment, and no mortgage insurance premium you will see that most people obtain a VA mortgage.

Why would a person not obtain a VA mortgage?

Usually it’s because they did not know they even qualified for a VA mortgage loan.  A lot of first time home buyers will find out after they purchaed a home with an FHA loan or even a Conventional loan.  A few years later these borrowers decide to refinance.  At that time, when we qualify a borrower we always ask them, “Have you ever served in the military?”  “Do you have VA benefits?”  If they answer yes, then we go over the VA home mortgage loan and it’s requirement.

Credit and Fico Score Requirements On A VA Loan:

Unlike a regular Conventional loan, VA loans allow borrowers to have less than perfect credit.  Our lowest VA fico score requirement is 580.  However, don’t expect to obtain the same great rate as a 720 borrower.  VA loans also allow borrowers to obtain a loan quicker after a bankruptcy or short sale compared to a Conventional loan.  A chapter 7 bankrtupy has a two year and one day wait requirement as of the day this article was wrote.  For a chapter 13, a one year of payout must elapse.  Payment performance needs to be satisfactory.  Buyer must receive permission from the court to enter into a mortgage.

 

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