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CommunityMoney SmartsMay 15, 2019
Serving as a member of the United States Military can be one of the most arduous and difficult jobs imaginable. In return, many financial organizations have gone out of their way to provide active and retired members of the military with special discounts and offers.
One of the most common of these financial options is a Veterans Affairs mortgage, better known as a VA loan. All too often, however, veterans and active-duty military members have lingering questions about exactly what a VA loan is and who is eligible for it.
What is a VA loan?
According to its simplest definition, a VA loan is a specialized loan issued by a private lender that is insured by the Department of Veterans Affairs. Hal M. Bundrick of NerdWallet points out that the Department of Veterans Affairs does not issue out these loans. Instead, the Department of Veterans Affairs insures a portion of the loan in the scenario of a default.
The loans themselves are issued out by a set of third-party financial organizations. According to the Department of Veterans Affairs website, VA loans are most often used for mortgages. This includes the purchasing of a home, condominium or unit in a VA-approved project, as well as the costs needed to build a home.
Bundrick warns that these third-party vendors can often add stipulations of their own to VA loans and therefore, just like with any other loan, eligible veterans and active-duty military members will want to shop around for the best deal.
VA loan eligibility
Eligibility for a VA loan is a bit more complicated than simply being an active or retired military member. There are several additional requirements that must be met. Polyana Da Costa of Bankrate explains that active-duty military members generally qualify for a VA loan only after completing six months of service. The required time of service is six years for reservists or members of the National Guard, unless they are called to active duty, in which case they gain eligibility after 181 days.
During periods of war, active members of the military are eligible after 90 days of service. The Department of Veterans Affairs website lists the required amount of service that veterans must have completed during their tours of service in detail, depending on when they served.
Da Costa goes on to explain that spouses of military members are sometimes eligible for VA loans as well, depending on the situation at hand. Some such scenarios where spouses would qualify involve their partner dying while on active duty or passing away as a result of a disability acquired during their service.
VA loan benefits
One reason so many veterans and active military members choose to take out a VA loan is due to the various benefits that one supplies. For example, down payments aren’t usually required for a VA loan. Furthermore, Bundrick explains that mortgage rates are typically lower than those found for traditional loans. This can help veterans and active-duty military look into purchasing properties that would typically be out of their reach.
One of the largest benefits of a VA loan is that they don’t require a minimum credit score to qualify. However, just because the loans themselves don’t require a minimum credit score doesn’t necessarily mean the third-party financers that issue them out won’t. Still, the credit scores that most lenders ask for aren’t very high, either. Da Costa explains that most lenders require a minimum credit score of 620.
If military personnel have served or are in the process of serving their country, and if they meet the given requirements, a VA loan will likely be their best option for financing their next home.