What Chicago Home Buyers Need to Know About VA Loans

If you’re comparing home loans, you’ve probably come across VA Loans.

Sure, they sound appealing. Afterall, a VA Loan can mean as little as $0 down.

The catch, of course, is that not everyone qualifies.

This type of loan first came about in the mid 1940s. The idea was to help service members who didn’t necessarily have excellent credit or a down payment to buy a home.

To this day, VA Loans still make it possible for veterans and active military members to purchase a home.

To get a VA Loan, you have to either be a

• Veteran
• Active service member
• Military Spouse (certain qualifications)

A Certificate of Eligibility, or rather COE, is used to confirm you do indeed qualify for the benefits of a VA Loan.

If you do qualify, a VA Loan can be used to

• Purchase a home
• Build a home
• Refinance

You’re not restricted by type of home either. You can use a VA Loan with a

• House
• Manufactured home
• Condo
• Duplex

A VA Loan is issued by a private lender, such as a bank, credit union or mortgage company, but it’s guaranteed by the U.S. Department of Veterans Affairs.

Not every VA Loan is exactly the same. With this in mind, you’re able to shop around and compare.

What are the advantages of a VA Loan?

• Possibly no down payment

Again, you could be looking at a down payment of $0.

• No Private Mortgage Insurance

Because it’s backed by the government, you don’t have to buy Private Mortgage Insurance like some other borrowers are required to obtain, either. This can save a lot of money each month.

• Easier to obtain

This type of loan is also easier to obtain because the bank assumes less risk. Some people are able to qualify for a VA Loan even when they don’t meet some of the requirements of a conventional loan.

• Better rates

You can also sometimes get a much better rate with a VA Loan than you’re able to get with a conventional loan.

• Lower closing costs

Yet another advantage has to do with closing costs. With a VA Loan, closing costs are typically lower. Sometimes, the seller even pays the closing costs.

How much of a loan can I qualify for?

The amount of the loan is usually tied, at least in part, to your debt ratio.

That ratio determines how much you can afford to pay each month.

A VA Loan is either

• Fixed rate
• Adjustable rate

Are there any other considerations?

Most people who get a VA Loan, but not all, are responsible for a VA Funding Fee.

This fee helps run the program and is typically about 2.3% of the home’s purchase price for a first-time VA Loan recipient. It’s a bit higher for repeat homebuyers.  

The fee, however, can be rolled into the loan amount. It’s also waived for some borrowers.

Like other loans, you will have to have an acceptable credit history and enough income to cover your monthly payments.

Not only do homebuyers need to meet certain income and credit requirements to qualify, but you also need to be able to show proof of your military service history.