For this question, we reached out to our Loan Partner, Thad Wise, with First Savings Mortgage. Here’s his response:
If you are a veteran, active duty, reserves or national guard you have access to the best mortgage available. You can buy a home
with no money down and no money out of pocket. How is this done? VA loans are one of the only loans where you can finance 100% of the sales price and with a seller or lender credit you can truly get the keys to your new home for ZERO money out of pocket.
There are many reasons why the VA loan is so attractive.
Here are my top 5:
1 – 100% financing – 0 down payment required
2 – NO mortgage insurance. When you put less than 20% down with a conventional loan private mortgage insurance is required. Whether you pay it monthly or take a higher rate to buy it out, the PMI is unavoidable. There is never PMI with VA loans.
3 – Interest rates are always very low. The current rate for a VA Loan is 3.5% VS 4.0% for Conventional
4 – Credit Qualifying is very liberal. If you have a 620 credit score you qualify for a VA loan at a very good rate (3.75% todays rate). Just to give you an idea of what a 620 score would get you in the conventional world. 4% would cost you 3.0 pts today. VA understands if you have had a prior credit crisis and only makes you wait 2 years to buy another home if you have had a bankruptcy, short sale or foreclosure.
5 – Income Qualifying is also very liberal. The magic number for conventional loans is a DTI (debt to income ratio) of 45%. This is the main qualifying ratio lenders us to make sure the borrower can afford the home. It is calculated by taking the new house payment of principle and interest, taxes, insurance, HOA plus all your monthly loan payments and credit card payments. This is divided by your gross (pre-tax) monthly income. If your over a 45% you are cooked. You don’t qualify. Generally speaking you can get VA approved up to a 55%.
There are many options within the Veteran’s Affairs Loan program. Contact us to find out more today!