By Lauren Ratier
Before signing on the dotted line of their home loan, millions of veterans each year must decide between the VA Home Loan Program and the various other lending options available to them, including conventional loans, FHA loans and USDA loans. Here?s a look at these loan programs side by side to see their various benefits and drawbacks and which group of people is best suited for each option.
VA Loans
For active duty service members and veterans, the VA Home Loan Program offers the chance to purchase a home without a down payment and no private mortgage insurance. Through the program, lenders tend to allow lower creditworthiness ? a score of about 620 or higher ? than conventional lenders.? Although there is a funding fee that varies based on being active duty or part of the Reserves/National Guard, the loans have limits ranging from $417,000 to more than $1 million.
In addition, the interest rates tend to be competitive with or lower than conventional loans. The process for obtaining this type of loan requires a Certificate of Eligibility, finding a lender that offers this type of federally guaranteed loan and remaining in line with certain ongoing occupancy requirements even during repayment.
Ideal For: The majority of veterans and active duty service members who are able to prove eligibility.
Conventional Loans
For the average buyer, conventional loans are the most common route to homeownership. They usually come with a 5 to 20 percent down payment, as well as private mortgage insurance and various closing costs. Additionally, buyers typically must have a credit score of 680 and up to qualify for a loan. These loans lack government guarantees, such as those available in the VA Home Loan Program.
Ideal For: The average borrower who has the credit and cash to secure a loan and back it up with a significant sum for a down payment. Borrower also must be able to afford PMI and various other expenses associated with home loans.
FHA Loans
The Federal Housing Administration is similar to the Veterans Affairs Department in that it guarantees loans for qualified borrowers. However, these loans have a minimum down payment of 3.5 percent, which differs from VA home loans. Credit score requirements are not a part of these loans, meaning lenders are able to finance borrowers with scores ranging around 580. However, these borrowers still must pay an up-front mortgage insurance premium along with annual premiums.
Ideal For: Those who are low- to middle-income who are unable to qualify for no-down payment programs such as the VA Home Loan Program.
USDA Loans.
Just as the FHA and the VA, the U.S. Department of Agriculture maintains its own home loan program as part of its Rural Development Office. This is the only no-down payment loan program other the VA Home Loan Program. These loans are available to lenders with a credit score of at least 620 who are seeking to buy a home located in what the USDA considers a qualified rural area. Borrowers are not required to purchase private mortgage insurance or pay a mortgage insurance premium.
Ideal For: Veterans who live in rural areas who may or may not qualify for the VA Home Loan Program.
For veterans who meet the eligibility requirements of the VA Home Loan Program, it tends to be the best option. But due to its other restrictions and rules such as occupancy requirements and eligibility process borrowers must complete before even being able to seek a loan, prospective lenders should also consider the other options available on the market, including but not limited to those listed above.
Lauren Ratier is a mortgage commentator and real estate blogger for Veterans United Realty, a blog proudly sponsored by Veterans United Home Loans, the nation?s leading provider of VA loans.
Related posts:
- Where Can I Go To Qualify For A Loan If I Have A Low Credit Score?
- What Does It Take To Get A First Time Homebuyer?s Loan?
- Can I Get A Mortgage Without A Down Payment?
- How Can We Get Financed For A Home When We Have Bad Credit?
- Should I Look For A New Broker?
About Scott Garner
Scott Garner is Editor in Chief of REALTOR.com Blogs and Social Media Supervisor for Move, Inc.
View all articles by Scott Garner
Source: http://www.realtor.com/blogs/2012/06/29/is-a-va-loan-your-best-mortgage-option/
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