Last Updated on February 6, 2019 by Luke Feldbrugge
We cannot thank you enough for your military service. We also cannot feel anything but complete joy when a hero gets into their new home because we understand having a home of your own means so much. Buying a new home is a sometimes tricky process, and we want to make it easier for you. You might not know that as a military service member, both past or present, you could be eligible for a VA loan. Keep reading to find out how a VA loan can help you in the home buying process.
What is a VA Loan?
VA loans are available to active and retired service members and veterans, as well as military spouses. VA loans give you the chance to buy a home without the required down payment or mortgage insurance. The United States government guarantees these loans so lenders, many of whom work with us, can offer low-interest rates, based on your financial situation. There are specific income and debt requirements. VA lenders also have additional stipulations, such as credit score minimums, but this type of loan is an excellent option for you if you are looking for a new home.
What Types of VA Loans Are Available to Me?
VA loan options include 30-year, 20-year, and 15-year fixed-rate loans, as well a 5-year ARM loan. Jumbo VA Loans are also a possibility for up to $1,500,000. Getting a 30-year loan means making smaller monthly payments, but you’ll pay more money in the long run because interest accrues over 30 years. With a 15-year mortgage, your monthly payment is higher but it covers more of the principal, and you pay less interest over the period of 15 years.
What is an ARM loan?
ARM stands for Adjusted Rate Mortgage. With 15-year, 20-year, and 30-year loans, your interest rate is fixed and never changes throughout the life of the loan. With an adjusted interest rate, your rate varies based on how the Federal Lending Rate changes.
What Determines My Interest Rate?
VA loan interest rates depend on various factors, including your credit score, your income, current market conditions, and whether you choose a 15-year, 20-year loan, or 30-year loan.
How Does My Credit Score Affect My Interest Rate?
Just like any other loan, with a higher credit score, you’ll have a lower interest rate. If your credit score is less than what traditional loans ask for, you will have a higher interest rate. You’ll still have a better chance of getting a loan and paying less every month through a VA Lender because of the U.S. government’s guarantee, though. Make sure you read the VA Guaranty, to see what benefits you can receive when purchasing a home.
What is the Difference Between Interest and APR?
The rate of interest on your loan is the amount you pay each year to borrow the finances to purchase your home. Knowing your interest rate will tell you what your monthly payment will be. The APR will show you what the total amount of the loan will be. The Annual Percentage Rate shows you borrowing costs, like interest rate, origination fees, closing costs, discount fees, and any other fees, depending on the transaction. Your APR is sure to be higher than your VA loan interest rate because the APR covers more than one cost.
Why Do I Need to Look at APR?
If you know the Annual Percentage Rate, you will be able to compare multiple loans. It will show you how much you’ll be paying in the long run. Be aware that different lenders, VA or otherwise, calculate APR in different ways. They also may offer different interest rates, so don’t accept the first pre-approval letter you receive. Talk with multiple lenders to see what they can provide you with in regards to the loan amount, interest rate, and APR.
How Does APR Help Me Choose My Loan?
If you have found a home and plan on living in it for the next thirty years, you should take out a loan with the lowest APR. That will allow you to pay the smallest amount available for your home. If you want a temporary home and plan on upgrading after a short amount of time or are moving, get a loan with a higher APR. You’ll pay fewer upfront costs, and the total cost will be lower for the first few years.
Do I Still Qualify if I Am Purchasing with My Spouse?
Some service members have questions about their civilian spouses in regards to the VA loan process. If your spouse has substantial income, you can get a more significant loan. The VA allows spouses to co-sign on loans, but they also consider both credit scores. Lenders look at the lowest credit score, so you will be charged a higher interest rate if the credit score of your spouse is lower than yours.
Surviving Spouse Eligibility
If you are a surviving spouse of a veteran or member of the service who died while serving in the military, you can apply for a VA loan. You can also apply if you are the surviving spouse of a military member classified MIA or was a prisoner of war for a minimum of 90 days, as well as a Veteran who was considered disabled and was classified as eligible for disability compensation at their time of death.
Homes for Heroes
If you provide service for the military or did in the past, work with a Homes for Heroes Affiliate Real Estate Specialist and earn $700 for every $100,000 you spend on a house. You can purchase a house with no down payment or mortgage insurance, and you will also receive a Heroes Rewards® Check upon closing on your new home. If you are selling a home, work with our Real Estate Specialist and save 25% off of your closing costs. It’s our way of saying thank you. Sign up today.