Are VA Loans the Best Choice for Military and Veteran Homebuyers?
by PCSgrades Staff - August 16th, 2022
When does it make sense to use my VA Loan Guaranty benefit? Let’s make sense of it all and uncover the truth behind the advantages and disadvantages of VA loans and Conventional loans for active duty military and veterans.
Conventional loans are more common, because they are for anyone who qualifies. There are no restrictions on who is eligible to apply for them.
Who is eligible for VA Loans?
VA Home Loans are designed for:
Active Duty
Guard/ Reserve
Veterans
Surviving Spouses
To determine if you are eligible for a VA loan, you first need to get your Certificate of Eligibility. There are two ways to obtain your certificate: visit www.va.benefits.gov (may take up to 5 days) or speak to your lender (normally takes a few minutes). Keep in mind, there are still some restrictions on when a service member, veteran, or spouse can use a VA Loan.
Just because you’re eligible for VA benefits doesn’t mean you qualify for a mortgage loan. This is where people are most frustrated, “I earned my benefit, why don’t I qualify?” It all really depends on your particular financial situation.
Read more here about recent changes to VA Loan benefits, limits, and eligibility.
Advantages and disadvantages of a VA Loan
VA loans and Conventional loans offer up to $417,000 in financing on the first mortgage in most counties across the country, but there’s a big difference when it comes to down payments for VA loans. Conventional loans require a minimum of 5% down (3% for first time home buyers), but a VA Home Loan up to $417,000 has no down payment requirement. When it comes to buying your first home, this makes a big financial impact.
Advantages of a VA Loan on a primary residence:
VA loans often have lower interest rates than Conventional loans.
You don't have to pay Private Mortgage Insurance (PMI), even if your down payment is less than 20%.
NOTE: Some lenders offer Conventional loan products that don’t require PMI, but you will have an increased interest rate to cover the increased risk that PMI would ordinarily cover. So either way, you pay more.
Situations where Conventional loans are preferred over VA loans:
Buying a second home or investment property (since VA loans require the property be your primary residence.)
Here are 8 more reasons to use your VA Loan benefit when buying a home.
When can a service member or veteran use a VA Loan?
Once you have your Certificate of Eligibility, you can apply for the VA Home Loan for most properties that are within your loan budget range. However, understand that VA Home Loans are designed for the purchase of your primary home, not for an investment property or a second home.
What type of property can you buy with a VA Loan?
Single Family Home
Condo (in VA approved buildings)
Planned Urban Development (think of a subdivision that has a Homeowners Association fee)
Multi-unit Residential Building (two- four units)
Each of the above provides options for no down payment, but they come with some restrictions. This is where an experienced mortgage lender is crucial as they can walk you through the entire mortgage process.
When deciding to use your VA benefits on a VA loan, or moving forward with a Conventional loan, speaking with a qualified mortgage lender will help you better understand all available options and what works best for you.
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