What is a VA Loan?
An VA loan is simply a mortgage loan that is guaranteed by the Federal Government, specifically, the Veteran's Administration(VA). This government guarantee reduces the financial risk to VA-approved lenders if the borrower defaults on their mortgage payments.
Why get an VA Loan?
VA loans allow borrowers to finance 100% of the sales price, have the seller pay ALL of the closing costs and has no mortgage insurance (MI). If you are a qualified Veteran and are putting less than 20% down, a VA Guaranteed loan will usually have the lowest payments of any loan type.
VA requires only a 600 score.
Conventional loans generally require a 620 score and have rate increases on a sliding scale for everyone who has less than a 760 score. VA's interest rates are usually better than Conventional for anyone who doesn't have a high score or lots of money to put down and with no mortgage insurance required, it results in a much lower monthly payment. VA is NOT just for first time buyers.
VA loans have been around for over 70yrs and have always been "Full Doc" common sense mortgages where the borrowers must provide proof of sufficient income and assets in order to be approved. In addition to the normal "Ratios" that FHA and Conventional loans use, the VA loan has a "Residual" net income requirement based on family size and home value.
Whenever I have compared a VA loan with other loan types for my Veteran borrowers, the VA loan wins easily with anything less than a 20% down payment.
Of course, everyone's situation and qualifications are different and we will suggest other options if it looks like they would result in a lower monthly payment or costs.