What Mortgages Are Best For Veterans?
If you've recently left or retired from the military, the transition to a civilian apartment from a base housing rental can be a jarring one. You may be eager to purchase a home of your own, but may not have the cash saved up for a hefty down payment and closing costs. Are there any lending options available to you based on your veteran status? Read on to learn more about Veterans Administration (VA) loans, as well as several other types of government-backed loans that could allow you to purchase a home sooner rather than later.
Although the VA does not lend money itself, it guarantees loans taken out by veterans or their spouses -- ensuring that your lender is repaid by the government if you default on your loan. This makes granting a mortgage to you a very low-risk proposition for the lender, allowing you to receive a lower interest rate and more favorable terms than you'd receive on your own. You should be able to purchase a home for no down payment and no private mortgage insurance (PMI), and could potentially even receive a forgivable loan from the VA if you suffer a financial setback that causes you to fall behind on mortgage payments. You'll also be essentially exempt from credit score parameters, ensuring you can qualify for a loan even with bad credit.
Another option to help get you into a home before you've had the chance to save up much of a down payment is a loan through the Federal Housing Administration (FHA). These loans do require a small down payment (at least 3.5 percent), but you'll still be able to enjoy a competitive interest rate. FHA loans also have a relatively relaxed credit requirement, allowing you to qualify for a loan even if you have a bankruptcy or late payments in your past. Because your final mortgage and closing costs will be relatively streamlined (as compared to other mortgage borrowers), you'll know exactly how much you'll be able to spend on a home and can price your offer accordingly.
Although the USDA program isn't as well-known as FHA, it offers both direct and guaranteed loans to eligible borrowers. Direct loans have a fairly high qualification threshold and are available only to low-income applicants purchasing certain types of properties, but can offer an interest rate of as little as 1 percent. Guaranteed loans are available through private lenders and guaranteed through the USDA. For both types of loans, zero down payment is required (although you'll have to pay PMI) and the interest rate is very competitive. You can get a free VA loan quote from most lenders.