Are you an active-duty service member or veteran considering buying a house? That’s good news because you may be eligible for a VA loan – a loan with significant benefits that are hard to beat. You can get lenient credit requirements, and you won’t have to make a down payment or pay for PMI. So let’s see if a VA loan is right for you. Here’s everything you need to know about VA loans when buying a house in Floresville.
VA Loan Overview
To help you understand what you need to know about VA loans when buying a house, let’s begin with an overview of VA loans.
Guaranteed by the U.S. Department of Veterans Affairs (VA), a VA loan “is a mortgage loan for service members . . . Its main purpose is to help Veterans finance a home purchase with favorable loan terms.”
Qualification for a VA loan involves meeting the income and credit requirements, and you will need to have a valid Certificate of Eligibility (COE). “While length of service, duty status, and conduct can also affect your eligibility for a VA loan, you may be able to obtain a COE if you” are . . .
- A veteran
- An active-duty service member
- National Guard member
- Reserve member
- A surviving spouse
Pros of VA Loans
If you are considering buying a house with a VA loan, you should be aware of the significant benefits. It is considered an excellent loan for any veteran who is qualified for that type of loan.
“[T]he VA guarantees a portion of the loan will be paid back to the lender, in case the homeowner defaults. Government backing gives lenders the confidence to extend financing with great rates and terms. While the VA insures the loan, the government itself does not lend money for the loan . . . You actually get financing from a private mortgage lender, . . . just like you would with a conventional loan.”
The state of Texas has TX Vet loans which are available for any Texas veteran. To be eligible one has to met specific requirements. https://vlb.texas.gov/loans/
No Down-payment Requirement
One of the biggest pros of VA loans is that qualified buyers typically don’t have to make a down payment, being able to “finance 100% of their primary home’s sale value.”
No Private Mortgage Insurance (PMI)
For almost all other mortgage loans, when buyers put less than 20% of the sale price down, they have to pay for PMI. “But that’s not the case with a VA loan. With a VA loan, there’s no PMI, potentially saving you hundreds each month when compared to a conventional loan.”
What is PMI on other loans: https://www.consumerfinance.gov/ask-cfpb/what-is-private-mortgage-insurance-en-122/
More Forgiving Credit-wise
“Since the VA backing reduces lenders’ risk, they can be more flexible with their terms, such as credit score minimums and ranges. The minimum will vary from lender to lender, but most are looking for a credit score of 620 or above. . . . Credit ranges are much broader as well, and interest rates are not based heavily on credit scores. For example, if you have an average credit score, you may get the same interest rate as someone with an excellent score. In addition, the VA program is more lenient with things like a previous bankruptcy, short sales, and foreclosures than a conventional loan program.”
Cons of VA Loans
You should also be aware of the cons of buying a house with a VA loan. There are few, such as . . .
The Mandatory Funding Fee
“The Funding Fee is a mandatory fee applied to every VA purchase loan or refinance. It’s required by the VA, which uses it to cover losses on loans that may go into default. The fee is a percentage of the loan amount, and it’s based on whether this is your first time using a VA loan, if you’re making a down payment, and if you’re purchasing or refinancing. The fee is listed as a closing cost, but you can finance it in addition to your loan amount.” The real negative about financing it as part of the loan is that not only are you not having a down payment but you are also adding the funding fee to the loan amount. When you sell it has increased the amount owed on your home. For a situation where someone may have to sell within a couple of years, one can be upside down after closing costs to sell.
Required VA Appraisal for Buying a House
This is really more of an inconvenience than a con, but you should still take it into consideration. “One contingency of a VA loan is that you must get a VA appraisal. The VA appraisal is an evaluation of your proposed property value. An independent VA-certified appraiser inspects the condition of the home, compares surrounding sales, and makes a value assessment. The appraisal fee is charged up front and can vary based upon the property being purchased and the lender. Most VA appraisers are more stringent than appraisers for other types of loans. There are not as many VA appraisers available.
A VA appraisal usually takes about 14 days to be completed, but it can vary based upon the activity in the area; land takes longer than a home based upon the loan type. In addition, timelines for these appraisals can vary by state. A Floresville agent can help you understand what you’re looking at time-wise for the VA appraisal. To find out more, just call (210) 216-7722.
Process of Buying a House With a VA Loan
The process of buying a house with a VA loan is very similar to that for any other home purchase. Here’s how it typically goes . . .
- Prequalification – “Find a VA lender and prequalify to get an estimate of how much house you can afford based on your income, credit, entitlement, and other financial factors. Prequalification is a basic first step that paves the way for a much more powerful step – VA loan preapproval.”
- Pre-approval – Pre-approval tells how exactly how much you can borrow and that you can actually borrow that amount (barring any changes in your financial situation). Your pre-approval letter will make sellers see you as a serious buyer and will give you more negotiating leverage.
- Making an offer – “When you and your agent find the perfect home, it’s time to evaluate if it meets VA criteria to craft and present an offer to the seller.”
- VA appraisal and underwriting – We’ve already touched on the VA appraisal. “Around the same time, the lender underwriters will evaluate your income, financials, and related documents, along with the appraisal once it’s finalized. If everything checks out, you’ll be issued a clear to close and move on to your loan closing.”
- Closing – Finally, after all the paperwork is signed, you get the keys to your new home.
Your Partner for Buying a House With a VA Loan
As you can see, while this is similar to buying a home with a conventional loan, there are some differences and special considerations. That’s why you’re much better off partnering with an agent who has experience with VA loans and the many nuances involved. Not only that but having a good VA lender is essential. And as an agent with good lenders you can count on, it makes getting to the closing table easier. If you’re considering buying a house in Floresville with a VA loan, don’t hesitate to contact us at (210) 216-7722.
Faye Y Taylor, Floresville TX Realtor®
Serving all of Wilson County and the South Texas area
Floresville Real Estate Agent – Faye Y Taylor is here for help and to answer any questions you might have