If you are a VA first time home buyer and you served or still serve in the US Military, you are at an advantage over everyone else. VA loans are the perfect tool for all first time home buyers that qualify. If you want a loan that has no down payment requirements with lower rates, then the VA loan is the perfect fit for you. The VA program was developed decades ago to help aid in integrating the returning war veterans into society. It was felt the benefits offered with the VA program could far outweigh any other type of short term government assistance, while limiting the burden on the US tax payers. This has held true since its inception in 1944 and continues to benefit veteran first time home buyers to this day.
VA First Time Home Buyer benefits
There are many benefits with VA loans, some that are especially beneficial to first time home buyers.
- Zero down payment required
- No monthly mortgage insurance
- More relaxed credit requirements
- Less income needed to qualify
- Home Buying Assistance
This is the number one benefit of the VA loan. So it’s fitting that it’s first on the list. Unlike any other type of loan product out there, with the exception of the USDA loan, you’re not required to put any money down when you purchase your new home using your VA entitlement. The only time a veteran would be required to apply a down payment is when the purchase price exceeds the VA county loan limit in the county the home is being purchased in. (See our VA County Loan Limits page)
No Monthly Mortgage Insurance
FHA and conventional loans have what is in essence, an insurance policy, paid by the home owner. This policy is in place to cover lenders should the home owner default on their mortgage. This policy is issued as a single premium in some cases or a monthly premium or both. This is called “Mortgage Insurance”. VA is a mortgage insurer much like FHA and yes, they do collect a premium upfront at closing (financed into the loan). This premium is called the “Funding Fee” (See our Funding Fee section for more information) However, unlike FHA loans, VA loans don’t require you to pay any monthly mortgage insurance. This relieves you of an added monthly expense, therefore allowing you to qualify easier or for more than you might with another loan product.
Lower Income can still Qualify
This is where VA loans really help first time home buyers. It’s not uncommon that first time home buyers are still trying to get their careers started. Yet others may still be enjoying life a little before they do. In either case, years of promotions and upward salary movements haven’t occurred yet. If this sounds like you, don’t worry. VA has higher debt ceilings for first time home buyers…50% to be exact. What this means is, when you combine all of your monthly obligations and add it to your new VA loan, you can qualify if that total amount doesn’t exceed 50% of your gross monthly income. This is an enormous advantage for first time home buyers as it allows you to qualify easier or possibly even qualify for more than you might have expected.
More Relaxed Credit Requirements
Unlike other loans, you won’t be turned down if you have had some minor credit issues in the past or some that may even still be lingering. Make sure to always ask what the minimum credit requirements are of the bank you’re working with. Most lenders have a minimum 640 credit score requirement. Don’t worry if you’re credit score is below that. Veterans can qualify down to 620 credit score for VA Loans. In addition, if your score is slightly lower than that, the bank will work with you to help get your score up to 620.
Some lenders offer this to home buyers using their VA eligibility to purchase a home for the first time. This is money that is provided to you to help pay part or all of your costs for you. It can only be used to cover loan costs, not including the down payment. In some cases it can total as much as $8,500 depending on the geographic location and home values. The veteran will need to qualify for a VA loan in order to receive this assistance. The Lender Representative at the bank can help answer any questions you may have about this. Fill out the VA Eligibility Home Buying Assistance form to find out if you qualify.