A VA loan is guaranteed by the U.S. Department of Veterans Affairs. The loan itself isn’t actually made by the government, but the fact that it’s backed by a government agency makes lenders feel more comfortable offering these loans, because they take on less risk than with a conventional mortgage. As a result, it’s possible to get a VA loan without a down payment, and — sometimes — with looser credit standards.
The VA loan process works like any other conventional mortgage loan. Before lenders can approve applicants, they will ask to verify the following questions:
Since lenders will review your credit report, which also includes your payment history and debts, they will be able to calculate your debt-to-income ratio (DTI). DTI ratios give lenders a more realistic idea of a potential borrower’s monthly income and their recurring debts. Typically, lenders like to see a borrower’s DTI ratio of 41 percent or lower. However, many lenders have different standards to become eligible for a VA loan, and they will be able to determine your eligibility in correlation with your financial status and history.
Since the VA loan is guaranteed by the federal government, it helps eligible applicants with the following:
However, the VA does not guarantee the condition of the home you are purchasing, it guarantees the loan. This is often misinterpreted, so do not get the impression the VA will handle any damages or defects that need to be repaired. This responsibility will need to be taken care of by the potential homeowner.
There are many benefits when veterans finance a VA loan. This mortgage loan has helped over 25 million veterans obtain the dream of homeownership. Not only does the VA provide financial mortgage aid to veterans, but it also includes the following benefits:
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