VA housing loans are mortgage loans partially secured by the US Department of Veterans Affairs or VA. They are a viable option for eligible home buyers because they often do not require a down payment or PMI for private mortgage insurance. Are VA loans fixed rates?
Who is eligible for a VA loan?
These loans are provided by private lenders and are available to active service members, veterans, current and former National Guard and reserve members and surviving spouses. Interested buyers will need to obtain a certificate of eligibility from the US Department of Veterans Affairs:
- Member of active service
- Current or former member of the National Guard or Reserve (who has never been activated in federal service)
- Dismissed member of the National Guard (who has never been activated in the Federal active service)
- Survived spouse
Eligible home buyers can apply for COE in several ways, by post, online and through a lender.
VA loan interest rate options
Like conventional loans, VA loans can be offered as fixed or floating rate mortgages and can last up to 30 years. Before making a decision about financing your home with a VA loan, familiarize yourself with the different types of loans available so that you know what you want before you talk to a VA approved lender. Familiarize yourself with the different types of loans, read the information below.
VA mortgage rates are among the lowest
VA loan is seen as one of the lowest risk mortgage types available on the market. This security allows banks to lend veterans borrowers at extremely low interest rates.
VA rates are on average over 25 basis points (0.25%) lower than conventional rates, according to data collected by the mortgage software company Ellie Mae.
Most loan programs require higher advances and credit ratings than VA housing loans. In an open market, a VA loan should have a higher interest rate due to less severe credit guidelines and higher perceived risk.
Minimum credit score for a VA loan
The VA has not set a minimum credit rating for the VA mortgage. However, many VA mortgage lenders require a minimum FICO rating of 620 or more – so you should apply to many lenders if creditworthiness can be a problem.
Even VA lenders who allow lower credit ratings do not accept subprime loans. The VA Insurance Guidelines stipulate that applicants had to repay their liabilities for at least the last 12 months to be considered as satisfactory credit risk.
In addition, VA usually requires a two-year waiting period after bankruptcy or exclusion from Chapter 7 before it can provide the loan.
Borrowers in Chapter 13 had to make at least 12 payments on time and obtain permission from the bankruptcy court.