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Dec 15 Published in Santa Cruz Real Estate, Real Estate, Mortgage by member364276
Within the last year conventional lending programs have lessened their strict lending requirements, but that doesn't mean that obtaining a conventional home loan has become any easier. In fact, conventional lending is just as unaffordable and inaccessible as it has ever been to the average American which has led many to either avoid homeownership altogether or seek the aid of government program.
For veterans and active duty service members, a unique government lending option is available through the Department of Veteran Affairs - the VA Home Loan. Catering to the distinct financial needs of service members, the VA home loan provides military members with money saving benefits that they would otherwise not be able to obtain including:
No Down Payment: Perhaps one of the biggest perks to the VA Home Loan program is that borrowers can secure a mortgage loan without having to put down a down payment. Even though conventional lending programs have lessened their income requirements, they haven't exactly lessened their need of a high down payment. Borrowers wishing to obtain prime interest rates can still expect to have to pay a 20 percent or more down payment which isn't always an affordable option, especially in this economy.
No Private Mortgage Insurance Required: Conventional lending programs require that borrowers purchase private mortgage insurance (PMI) to reduce their risk in the mortgage. PMI, depending on the size of your mortgage, can be incredibly costly adding a couple hundred dollars on to your mortgage payment. Because a VA home loan is backed by the government, there is no need for PMI, which can save you thousands over the life of your loan.
Low Mortgage Interest Rates: Conventional lenders are allowed to set their own loan interest rates to entice customers; however, unless you are able to put at least 20 percent down on the home you wish to purchase and have a credit score well into the 700s, you aren't going to qualify for those low interest rates they are boasting. Because the VA home loan program is regulated by the government, interest rates are constant. What you see is what you get, and because the government partially backs each loan given, interest rates are generally competitive to those borrowers were find with conventional lenders.
The VA Home Loan also has high loan limits, which can be a big money saver for qualified borrowers. The average VA Home Loan limit is $417,000, but can be even higher in more expensive real estate markets, allowing borrowers the opportunity to purchase the home they desire without having to seek additional financing.
Who is Eligible for the Program: The VA loan requirements are quite lax, making eligibility for the program easy to obtain. In order to become initially eligible for the VA Home Loan program, service members must:
*Have served on active duty for 90 days during wartime or 181 during peacetime
*Or have served for at least 6 years in the Reserves or National Guard
Veterans and active duty service members will also be required to submit their Certificate of Eligibility in order to become eligible for the program. The VA home loan program does have lenient eligibility requirements; however, VA approved lenders will require that veterans and active duty service members present proof of a stable income and reasonable credit history in order to obtain financing.