Definition of "What is a VA loan?"

Conceived in 1944, the VA loan program is one of the oldest facilities offered to veterans and service members. This type of loan is guaranteed by the United States Department of Veterans Affairs, so the lenders are fully covered if the borrowers default on their loans. The VA loans offer 100% financing for properties up to $484,350, but the maximum VA entitlement may be even higher in 199 counties where the cost of real estate is unbearably high. There are very few types of loans with 0 down payment, however, home buyers must keep in mind that there will be closing costs involved as well as the cost of a home inspection and an appraisal. However, the closing costs can be paid by the seller and finally included in the final loan amount. 

What can you purchase with a VA loan? 

You may buy a primary residence, which can be a single-family house, a multi-family unit (up to a maximum of four single-family units - as long as you use one as your main residence), condos, townhomes, mobile homes, modular or prefabricated homes. Properties located near an airport or cooperatives are not eligible. Be aware that not all lenders will finance every type of dwelling. 

Who qualifies for a VA loan?

The US Army is the largest on the planet, boasting 1.28 million active personnel.  VA loans are among the top benefits of a military career. There is no income threshold, but VA loan officers pay attention to the residual income - the income left after paying all major expenses. Due to this thorough assessment, the foreclosure rate among VA loans is very low. Moreover, there is no age limit, as long as the borrowers are in full possession of their faculties. Other requirements:

  • The applicant must have served for 90 consecutive days during wartime.
  • At least 181 days of service are required during peacetime.
  • A minimum of 6 years of service in the National Guard or Reserves are also enough to qualify.

Children of veterans can’t apply for a VA loan, but surviving spouses of veterans who died in the line of service or following a disability from the combat field may qualify for one as long as they didn’t remarry. Also, if the military member had been declared missing in mission or a prisoner of war, then their spouse is also eligible for a VA loan. The minimum credit score? Well, yes, you can be approved for a home loan with a bad credit score as low as 580 points. 

Those with higher income may also get two VA loans at the same time. 

Work with an experienced real estate agent

Once you get preapproved, start searching for a real estate agent who has dealt with military personnel before. Those actively in this niche don’t lack new leads. Military wives are usually the ones more active on social media where they ask questions and ask for recommendations. However, those working in the military, while having a very stable financial situation, they lack stability, they can’t grow roots in one place. For real estate agents, this is a good thing, because they may get to handle more transactions than in other niches which brings them more commissions. 

VA loans for investment properties

If you can get approved for a 4 multi-family unit, well, don’t miss the opportunity to invest in such a property! Why? Because you can live in one unit and rent out the other three. You get a safe passive income stream which is big enough to cover the monthly payments, thus almost living for free in your own house. Other than that, VA loans don’t provide financing for investment properties. However, this shouldn’t stop you from becoming a real estate investor using other types of loans or tenancy in common.

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