When it comes to achieving the dream of homeownership, U.S. veterans and active-duty military personnel have an advantage in the form of VA loans. A VA loan (where the VA stands for Veterans Affairs) is a specialized mortgage program guaranteed by the U.S. Department of Veterans Affairs and offered by private lenders like banks, credit unions, and mortgage companies.
This unique loan option has played a vital role in helping veterans transition to civilian life after their service in World War II. These resources are available to qualified individuals as mentioned before and, unlike traditional mortgages, VA loans do not require a down payment, which can significantly reduce the financial burden on eligible borrowers. The U.S. Department of Veterans Affairs guarantees a portion of the loan, making it possible for lenders to offer competitive interest rates and favorable terms.
How does a VA home loan work and who qualifies
The government VA guarantee means that the government will pay the lender a part of the VA loan if the borrower fails to make the payments due to different circumstances. This guarantee not only reduces the risk for lenders but also offers favorable conditions so that loans are more accessible and applicants have peace of mind.
Eligibility is granted to those who have served the country faithfully for at least 90 consecutive days during wartime or 181 days during peacetime, along with National Guard members and reservists with six years of service. With flexible requirements and the potential to finance up to 100% of a property’s value, VA loans pave the way to brighter futures and cherished homes for our American heroes.
If you are the surviving spouse of a veteran who passed away while in service or due to a service-connected disability, and you have not remarried, you may be eligible for certain benefits. Additionally, if you remarried after reaching the age of 57 or after December 16, 2003, you could still be eligible for these benefits. Spouses of service members who are missing in action or held as prisoners of war are also eligible.
In some cases, you may still qualify for benefits even if you do not meet the length-of-service requirements, particularly if you were discharged due to a service-related disability. For more specific information, it is advisable to check with the Department of Veterans Affairs (VA).
How are VA loans payments calculated
VA loans are calculated taking into account various variables. For example, the price of the house, the down payment, the term of the loan, the percentage of interest, and the applicant’s military circumstances. Let’s prepare an example to get an idea of, more or less, how much a VA loan could cost you. Let’s start with a house that has a sales value of $250,000, and you’re going to make a 20% down payment, that’s about $50,000.
Let’s add a hypothetical interest rate of 6.22, with an annual real estate tax of about $5,000, and a homeowner’s insurance for an annual value of $2,000. The fixed term is 30-year, and the requester is either a veteran or an on-duty active member, the US Bank says with its VA loan calculator that the estimated first month payment is around $1,826. From that amount, 68% ($1,243) goes to the principal and interest amounts, and 32% ($583) is for taxes and insurances.
Afterward, the amount will go down to $1,243: by the 10th year, it will break down like this: $358 to the amount owed, and $885 to the interests. By the 20th year, $665 will go to the principal account and $578 to the interests. And by the 30th year of the loan, $1,236 will pay the principal owed amount and only $6 to the interests.