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Jan 2018

Financing Tips for Your VA Loan

When you’re ready to buy a home, your mortgage lender will offer you a variety of different mortgage loan options, from conventional loans to government-insured loans. Your loan options will be unique to your financial situation, and will depend on a variety of factors, including your credit score, debt-to-income ratio, funds for a down payment, and savings. Conventional loans often have stricter guidelines and higher down payment requirements than government-insured loans, making government-insured loans a popular option for many borrowers. A government-insured loan is exactly what it sounds like — a loan backed by the government, who guarantees repayment to the bank should you default on your mortgage payment. Government-insured loans are backed by either the Federal Housing Authority (FHA loans), the U.S. Department of Agriculture (USDA loans), or the U.S. Department of Veterans Affairs (VA loans).

For eligible American veterans, active duty military, Reservists, members of the National Guard, and the surviving spouses of veterans, a VA loan offers a government-insured loan with favorable terms.

VA loan basics

A VA loan is a very popular loan option. But who qualifies for these loans? You could qualify if one or more of the following conditions apply to you:

  • Veteran (single or married)

  • Active Duty Servicemember

  • National Guard Member

  • Reserve Member

  • Surviving Spouse of an eligible Veteran (certain restrictions may apply)

As we already mentioned, VA loans are backed by the Department of Veterans Affairs (VA). For those who qualify, these loans require no down payment, no private mortgage insurance, and offer flexibility with credit scores.

Since VA loans are backed by the government, your lender’s risk is reduced, which allows them to be more flexible with their loan requirements, especially credit score minimums and ranges. The minimum credit score required by many lenders is 620, but requirements vary from lender to lender. Atlantic Bay, for example, will potentially qualify borrowers who have a score of at least 580, if they meet certain additional requirements.

Tips for financing your VA loan

Whether you’re a first-time military borrower or an experienced homebuyer, if you’re interested in a VA loan, it helps to be educated and prepared on the loan options and process before you buy.

Start the process before you have a COE

A COE is a VA Certificate of Eligibility, which you’ll need to get a VA loan. This certificate verifies your character and length of service. However, you don’t always have to have your COE in hand before you start the loan process. Many lenders let you get your COE once you’ve already started the loan process, and some will even obtain the certificate for you. You can apply for a COE three different ways: through your VA approved lender, online through VA’s portal, or by mail with Form 26-1880. You can find more information on COE’s and how to get one on VA's Website.

Be familiar with your credit history

As with any mortgage loan, your credit score plays a very important roll in what you qualify for. To help creditors evaluate your credit worthiness, the Fair Isaac Corporation, known as FICO®, translates all of the information in your credit history into a number — your credit score. Your credit score ranges from 300-850 and is made of 5 things: types of credit history, number of credit inquiries, length of credit history, outstanding balances, and payment history.

Not sure what your score is? Each of the three credit reporting agencies, Equifax, Experian, and TransUnion, let you check your credit score online for free once a year. You can also do things to help improve your credit score if it’s not quite where you’d like it to be. Talk to your mortgage lender, they may have some suggestions to help improve your score, too.

Find a VA-knowledgeable mortgage banker and agent

Only VA-approved lenders can help you with a VA loan. Your mortgage banker should be able to explain the VA loan product and process to you, and you should feel comfortable going to them with any questions or concerns. Buying a home is a big decision, and your mortgage banker will play a big role in the process, so it’s important that you trust them.

Some mortgage bankers are more familiar and experienced with VA loans than others, so do your research before you make a decision.

The same thing goes for your real estate agent. An agent with experience helping VA borrowers can save you time and money in the long run. Your real estate agent should also serve as a source of VA loan knowledge for you throughout the home buying process.

Your VA eligibility never expires

Maybe you’re an experienced home buyer and you’ve already bought a home using your VA eligibility. Good news! When you’re ready to move, you can get another VA loan. You can reuse a VA loan as many times as you want, as long as the previous loan is paid off. Both experienced and first-time VA loan borrowers who start the home buying process with basic VA loan education are setting themselves up for the most successful borrowing experience. So, be prepared and do your homework on VA loans and their requirements. That way, you’re ready and confident to find your next home.