Texas VA home loans are the best possible option for veterans, active duty, retired members of the military and their spouses who survive them. These loans are offered by the Government to help the military personnel get a home loan. For all those who qualify and need money for buying or constructing their home, this is one of the best options available.
There are various financial benefits attached with this loan. The fact that VA loans require no down payment, no collateral, or monthly mortgage insurance make it an additional reason for the veterans to opt for this loan.
In this article we will cover everything that a potential military buyer should know to get the best deal through a VA loan.
Here Is A Brief List Of Some Benefits:
No Down Payment
Most home loan programs require a down payment before giving away the loan. Some of them even ask for around 3-5% of the total purchase price as a down payment. For an individual having bad credit, or someone who is trying to get into home ownership for the first time; such a down payment can be a huge hurdle.
However, this is not the case with VA loans. The borrower does not need to pay any money for closing costs, appraisal fees and other charges that come in the way of their dream home. The only thing required is a guarantee from the Department of Veterans Affairs, and there you go with your home loan approved.
Easy to Qualify
Like all other loans VA loans also require the borrowers to clear certain eligibility conditions before applying for the loan.
However, the eligibility criteria for this loan is relatively easy compared to all other loan products such as Conventional or FHA loans in Texas. The reason being The Department of Veteran Affairs wants to make sure that the veterans and qualifying military spouses get the benefit of this loan to buy or construct their dream home.
No PMI
Generally mortgage lenders require home buyers to pay an insurance premium, called Private Mortgage Insurance (PMI) for loans with less than 20% down payment. This is done because of the risk involved by lending money to borrowers who do not have any collateral.
However, there are no such requirements when you apply for a VA loan because you do not need to provide collateral to get your home loan approved. The fact that the VA provides you with a guarantee of your repayment makes it an added advantage of applying for this type of loan.
No out-of-pocket closing costs
Generally, borrowers need to pay State and County recording fees, title insurance, inspection fees and other charges as closing costs.
But, this is not the case with VA loans. The VA limits the closing costs that local mortgage lenders can charge to the borrower. This means that the borrower does not need to pay any amount over and above the loan itself. Making it an additional benefit over other home loans. Thus the money saved in closing costs can be used for buying furniture, renovating your new home, or any other expenses involved in setting up a home.
No Prepayment Penalty
Prepayment penalties are paid by the borrowers to get out of a loan before it expires. It is charged when someone tries to pay off his/her debt before the tenure of the loan.
However, this is not the case with VA loans because there is no prepayment penalty for the customers of these loans. This means that if you buy a home and suddenly have enough money to pay off your existing mortgage, you will be able to do so, without paying any charges from your pocket.
You can shop for the best rates
VA loans are neither serviced by the Government nor does it offer any type of loan. It is just a guarantor that you will get your money back if you follow the rules and terms of the loan agreement.
The loans are issued by private lending institutions or banks, which means that they continue to be governed by applicable laws. Moreover, the VA lenders in Texas set their own interest rate for these loans according to their own criteria.
This makes it possible for borrowers to shop for the best rates from all participating lenders and choose the best deal for themselves.
Funding Fee Flexibility
The VA charges an upfront fee called the funding fee to guarantee the loan. The amount of the fee depends on the borrower’s situation and is determined by three factors, namely (1) Loan Guaranty Level (2) Active-duty or Veteran Status (3 ) Type of loan. The borrower can finance this cost within the loan amount, pay it in cash at closing, or a combination of the two. This means that borrowers have some flexibility when it comes to paying for their VA home loan.
However, if you are a veteran or being honorably discharged then you are exempted from the funding fee.
VA Loans are Assumable
One of the main reasons for buying a home is that you want to own it even after your lifetime. This is the biggest advantage offered by VA loans over other types of credit.
A VA loan can be easily transferred from one borrower to another and does not require any type of approval from the lender, unlike conventional loans. This means that you can sell your home at any stage of time, without worrying about the burden of repayment.
Qualifying Requirements
Your military status is not the only thing required to get a VA home loan. The loan is issued based on the borrower’s credit history, income and ability to repay the loan in case of an emergency.
Below are the few required factors you need to qualify for a VA Loan.
Eligibility
You can be eligible for VA loans if you are either (1) A Veteran (2) An active-duty member of the Armed Forces or Reserves (3) A surviving spouse of a Veteran or active-duty person.
Additionally, you can also apply for this loan if you are not a Veteran but get an honorable discharge.
Occupancy
It is essential that you keep in mind that VA loans can only be used to purchase a principal residence. This means that if you want to use this loan for investment purposes like buying commercial property, business property or even vacant land, you will not get the loan.
However, you can use your VA loan money to improve or repair an existing property that would qualify as a primary residence.
Minimum Credit Score
The minimum credit score required for a VA loan is 620. This means that if your credit score does not meet the criterion, you will have to improve it before you seek this type of home loan. In addition, borrowers with scores as low as 580 can also apply for the loans as long as they fall under their respective LTV and CLTV criteria.
Additionally, you can get your credit history evaluated by a VA approved company to improve the score so that it meets the minimum benchmark. This is recommended for customers with scores just below 620.
Debt-to-Income Ratio
This is an important criterion that lenders consider before giving you a loan. At least 36 percent of your income should go towards repaying the mortgage, if not more. If your current debt exceeds this amount then it might be difficult to get a VA home loan approval.
However, you can limit this risk by either paying down some of your debts or lowering your housing expenses. You can also increase your income to meet the criteria for Texas VA home loans.
Income Rules
Your lender will also assess your ability to repay the loan by looking at your current income. You must have a steady source of income, which should be pay stubs from the last 90 days. This will help lenders understand whether you can afford monthly payments or not.
VA Loan Limits in 2022
VA loans are issued based on the area of purchase. This means that your loan amount will not exceed the statutory limits set by the Department of Veterans Affairs.
The VA home loan limit currently stands at $510,400 for most states and counties across America. However, in certain high-cost counties the VA home loan limit is set at around $820,000. This means that you can choose to purchase any property across the country as long as it falls under the VA loan limit.
Read here to know the difference between Conventional and VA home loans.
Conclusion
The VA home loan has specific guidelines, but if you qualify under them, it is undoubtedly the best loan available for military personnel who want to buy their dream home. These loans offer several benefits over other types of loans and mortgages because they are issued without considering the borrower’s credit history.
However, it is always advisable to compare different VA loan options before taking one so that you can find the best deal for yourself.
If you are considering purchasing a home in 2022 then this is your best option.
