VA loans don’t require a down payment, making it easier for veterans to buy homes. Unlike conventional loans, VA loans often allow you to purchase a home with little to no money down.
Current VA home loan rates are usually much lower than conventional mortgage rates. This translates to lower monthly payments and significant savings.
PMI is an additional monthly fee required for conventional loans with a down payment less than 20%. Mortgage Insurance Premium (MIP) is also an additional monthly fee required for FHA loans. VA loans don’t have this expense reducing a big portion of monthly payments.
This document verifies your military service and discharge status (DD Form 214).
To simplify the process, the Department of Veterans Affairs created a Certificate of Eligibility (COE). This document verifies your military service and confirms your entitlement to a VA loan. You can obtain your COE online through the VA website.
Veterans, active-duty service members, and certain members of the National Guard and Reserves must meet minimum service requirements.
Paystubs, W2s, tax returns, award letters, bank statements, etc, will be used to assess your income and ability to repay the loan.
Your credit score will be a factor in determining your loan terms and interest rate. The minimum credit score requirement is 620.
It is used to ensure you can afford mortgage payments. VA loans have the most lenient DTI requirements than any other type of loan.
VA loans can only be used for primary residences, but similar to FHA loans, they also must meet certain safety standards.
VA loans may have an upfront funding fee, which is normally included in the loan amount.
| Down Payment | First-Time VA Loan Use | Subsequent VA Loan Use |
|---|---|---|
| No Down Payment | 2.15% | 3.3% |
| 5% or more | 3.3% | 3.3% |
| 10% or more | 3.3% | 3.3% |
These are the most common type of VA loan, used to finance the purchase of a new or existing home.
This option allows you to tap into your home equity by converting it to cash. You can use the funds for various purposes, such as debt consolidation, home improvements, or educational expenses.
Also known as a streamlined refinance loan, this option allows you to refinance your existing VA loan to secure a lower interest rate and potentially lower your monthly payment
VA Loans restrict property usage to your primary residence. You cannot use them for second homes or investment properties.
Generally speaking, VA loan interest rates are substantially lower than Conventional loan interest rates. The only negative to a VA loan is the funding fee.
If you are buying a primary residence, and have a smaller down payment (less than 20%), the VA loan’s lower interest rate and no PMI can outweigh the VA funding fee. If you have a high credit score and can swing a 20% down payment, a conventional loan might be a good option because you’d avoid both the VA funding fee and PMI.
The best way to pick your winner is to compare rates and terms for both options. Your Bluecastle Lending loan officer will set up both loan options in your portal. This will help you decide which loan offers the most significant financial benefit for your situation.
