For this blog series, we’ll be explaining what the VA Loan program is, it’s main goals, and how to apply. This is going to be a four part series, as we want to make sure you have all of the information on this specific loan program! Just like with the Conventional and FHA Loan program blogs, we’ll break this down into 4 parts.
What is the VA Loan Program?
The VA Loan program is a loan program that is offered to those who have served in the military, or the spouses of those who have served in the military and passed away while on duty. The VA Loan Program is also a mortgage insured by the Department of Veteran’s Affairs.
The Department of Veteran’s Affairs, or VA, insures mortgages on single and multi-family homes for VA-approved lenders to protect against losses as a result of a homeowner defaulting on a mortgage.
The VA Loans allow for veterans and surviving spouses of veterans to purchase housing with no money down. If a borrower qualifies for the VA Loan Program, this program is easily one of the least expensive in the short term AND the long term due to low interest rates.
A VA Loan does not have a specified minimum credit score for eligibility. However, because VA-approved mortgage lenders are the ones that ultimately originate the loan, private lenders themselves will set credit score requirements. Most lenders will proceed with a VA mortgage if the credit score is 620 or above.
Similar to the Conventional Loan Program, VA Loans do not have any property-specific requirements as far as home condition. But the home does need to be considered eligible by the Department of Veteran’s Affairs. This may mean a home needs to reside in specific areas and be under the VA loan limits.
The biggest advantage is that VA Loans have the most cost-friendly benefits when making the minimum down payment than other loan programs. The caveat to this is that borrowers must be categorized as a veteran or a surviving spouse of a veteran that passed while serving.
Why Was the VA Loan Program Created?
The VA Loan Program was created originally to create long term financial home loan options for veterans who have served. This program allows veterans to become suitable borrowers, allowing them to buy safe and sanitary homes that allow a bit of a lower restriction on down-payment requirements and credit score eligibility.
The Department of Veteran Affairs wanted to make owning a home a reality for a veteran at an affordable price. When the middle class moves into a home and settles in areas, this increases the economy of that specific region by more than if people rent in the same areas. Similarly to the FHA and USDA loan programs, VA homes must be considered “VA Eligible.”
Before the housing market bubble burst, there were all kinds of interesting program types for borrowers to take advantage of. For example, there were mortgage loans that covered 100% of the cost of the home if a borrower met the requirements.
Fortunately for Veterans, VA Loan programs are still apart of this wave. Veterans can qualify for a VA home loan that covers 100% of the home loan
For the next part, we’ll be talking more about Eligibility Requirements and borrower categories.