Affordable, easy, and flexible, VA loans are absolutely a great choice if you’re thinking about taking advantage of the current buyers’ market and purchasing a home. But before you sign on the dotted line, here are a few critical questions you’ll need to ask your lender.
1. Am I Eligible for a VA Loan? If you’re a veteran who served at least 90 days during wartime or 181 days during peacetime, active duty service member, or a spouse of an active duty service member or veteran, you most likely qualify for a VA loan. However, be sure you provide your lender with any and all documentation he or she requires during the loan process to avoid any unpleasant surprises along the way.
2. What is the Current VA Loan Limit for my Area? The VA has a set upper limit for the cost of each home purchased under the VA home loan program. This amount varies by the type of dwelling you select and the cost of living in each area of the country, and its critical to understand what the limit is for your area so that you’ll be better able to budget during your home search.
3. What is the Interest Rate on my Loan? VA loans typically have interest rates that are well below the national averages even in the prime lending market (that is, for buyers who have excellent credit and other financial qualifications). Still, ask your lender what your interest rate will be and if you need to do anything to lock in that rate for the remainder of the loan processing period so that it doesn’t change while you’re completing your paperwork.
4. Do I qualify for the no down payment option? Due to increasing restrictions on loan activity, most lenders and banks have had to suspend their low or zero down payment products, and VA loans are one of the last remaining loan programs to permit borrowers to finance up to 100% of their loan value. There are slightly different requirements for the zero down payment program, however, and borrowers will need to meet more stringent credit criteria, partially as a result of new legislation dictating borrower eligibility for these programs. Find out if you can qualify for this loan option before you count on not having to provide any down payment at closing.
5. Can I Roll My Closing Costs into the Loan? VA loans provide borrowers with the option to roll closing costs into the monthly payments of the loan, saving up to $8,000 at closing. Be sure to ask your lender if this is an option for your loan product.
6. What are the Rules Regarding Loan Transfers? Should you ever decide to sell your home, some VA loan products allow you to simply transfer your loan to the next buyer, streamlining the process and making it less financially restrictive for both the buyer and the seller. Spend some time thinking about the future now and make sure you are educated about the eventual sale of your home.
Photo thanks to nieve44 under creative common license on Flickr.