The tireless sacrifices and service of military members can never be repaid; however, the VA home loan program is a great start. For military members, this program makes the dream of home ownership a closer reality. While many armed forces personnel are familiar with VA loans, there are numerous misconceptions that open the door to confusion. One of the more widespread misconceptions is that VA loans come with a guaranteed approval.
Loan Guaranty Means Automatic Approval
The word guaranty often leads some to believe that their home loan will automatically be approved. In reality, the VA program only covers a certain percentage of the loan's value, generally somewhere around 25 percent. On a $150,000 loan, that is only $37,500.
In order to be approved, the borrower must have a financial standing that makes the lender feel comfortable going out on the line for the remaining $112,500. If the lender doesn't believe you can meet your end of the contract for the remaining 75 percent not guaranteed by the loan program, you might not be approved.
Service Is All You Need
Military service isn't all you need to be approved for a VA loan. There are two important criteria; service length and discharge status. In terms of service length, current members need at least 24 months of continuous service.
Regarding discharge status, a general or honorable discharge status is required. It's also important to understand that one criteria doesn't trump another. For instance, a service member who only served for 20 months, but was discharged honorably, can still be denied a loan. Additionally, the VA has the power to make exceptions in both of these areas.
No Credit Requirements
The VA home loan program doesn't have a minimum credit requirement. However, the lenders who fund the loans do set credit minimums. The majority of lenders set the bar around 640; however, some accept a score as low as 620.
While these credit minimum score requirements might seem higher when compared to some traditional home loan programs, even with a score on the lower end of the spectrum, those with a VA loan generally see lower interest rates than their civilian counterparts.
Although there are reasons why a VA home loan might be denied, compared to traditional loans, approval is far easier. Just make sure you understand the terms of the VA home loan program in order to keep your home buying process less stressful. For more help, contact a company like MCS Bank.
How many times have you put off making repairs around your home because you didn't have the money to make them immediately? Have those decisions caused even more repair bills because you waited to make the repairs? I have done this several times in the past, and, oftentimes, not making those repairs have cost me far more to complete because the damage spread. The whole reason I created my blog was to help others find the financing they need to make home repairs without worrying about choosing the wrong type of financing option. Hopefully, my hard-learned lessons will help you avoid the same struggles that I have undergone.