What is a VA loan and how does it work?

There are two types of rights you can claim:

  • Basic fee: either 25% of the mortgage or $ 36,000, whichever is lower
  • Bonus entitlement: up to 25% of the conforming loan limit of the Federal Housing Finance Agency minus the basic duty. For most of the United States, this limit is $ 510,400, and 25% of it is $ 127,600. Subtract the base entitlement of $ 36,000 from that, and you end up with $ 91,600 – the maximum bonus entitlement you could get.

If your basic entitlement does not guarantee you a loan high enough to purchase the type of home you want, you can combine your basic entitlement with your bonus entitlement to get a higher mortgage. Remember that you can usually borrow your entitlement four times. With a basic fee, that would give you a loan of $ 144,000, but in expensive parts of the country, that’s not enough to buy a house. As such, you can then combine your base entitlement with your bonus entitlement for a total entitlement of $ 127,600, then borrow up to four times that – $ 510,400.

VA loans can often be secured with no down payment, but you will need to prove that you have the income you need to meet your monthly mortgage payments. Technically, there is no minimum credit score requirement for a VA loan, but the higher your score, the more likely you are to be approved.

You might have a hard time getting a VA loan if your credit score is not at least 620. There are mortgage options for bad credit, so in some cases you may be able to qualify with a score. inferior. If your score isn’t good, it’s worth working on building or rebuilding your credit before you apply.

Plus, you can only use a VA loan to buy a primary home. You cannot take out a VA loan to buy a vacation home or investment property. You can use a VA loan to purchase a unit of a condo or townhouse, but the VA must assess the community before approving your loan.

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