What Is The Current Interest Rate For VA Home Loans?
Posted by @TopMortgageRate
If you can qualify for a home loan backed by the Department of Veterans Affairs, you've probably found the best mortgage available.
VA loans don't require a down payment and have lenient qualification standards.
Yet they charge a lower interest rate than conventional loans and are widely available. Many lenders offer this type of mortgage, from big banks to VA mortgage specialists.
Millions of veterans, as well as anyone on active duty and those in the National Guard and reserve units, are eligible. (Find the full eligibility requirements on the VA website.)
There's a key reason why this loan is so attractive to banks and mortgage companies. If you default, the government covers some of the lender's losses, typically 25% of what you borrowed.
That gives lenders the same protection as if you had put 25% down on the home, so they can offer lower mortgage rates on a loan for which it's easier to qualify.
What's more, VA borrowers rarely default.
Qualification requirements are relaxed
The government guarantee means you can have a much lower credit score and carry more debt than lenders would typically allow.
That being said, the government doesn't set minimum income or credit score standards. Each lender has its own qualification requirements.
For example, Veterans United Home Loans, the nation's largest dedicated provider of VA loans, says you can qualify with a credit score as low as 620.
With a score that low, you'd never qualify for a conventional mortgage, which typically requires a credit score in the mid-700s.
But successful applicants buying a home with VA financing had an average credit score of 708 during April, according to Ellie Mae, a California-based mortgage technology firm whose software is used by many lenders.
You also can carry a lot of debt. Borrowers can spend up to 41% of their pretax income on debts, including student loans, credit card bills and auto loans (possibly more if you're otherwise a low-risk borrower). Conventional loans have limits ranging from 36% to 45%, depending on your down payment and credit score.
VA guidelines will even consider borrowers who discharged a bankruptcy just two years prior to their application or who entered Chapter 13 bankruptcy just a year prior, as long as they can show a record of on-time payments over the last 12 months.
See entire article on INTEREST.com