A very popular way to invest in a home is through a Veterans’ Association (VA) loan. This type of mortgage is typically much easier to get than more traditional loans, which require you to have a higher monthly income or pay down existing debt.
A VA loan is often referred to as an “assist-buy” house because it can be used to purchase a home even if you don’t have a lot of money up front. What most people don’t know about VA mortgages is that there are actually two different types!
There are what we call Level Funding VAs, where part of the purchase comes directly from the Department of Veteran Affairs (VA). And then there are Direct Funding VAs, where you take out a private loan and use that to make the final payment. This article will discuss both types!
We will also talk about some important things to consider when choosing between a Fixed Rate or Adjustable Rate VA Mortgage. If you want more information on either option, check out our separate articles here and here.
This article will focus mostly on the benefits of being pre-approved for a VA mortgage, but before getting too excited, let us address the one major drawback – interest rates may not stay the same!
VA Loans Are Not Guaranteed
Just like any other mortgage, your monthly payments and ultimate cost depend largely on how much you spend and what kind of rate you get.
Make sure you have a good credit history
Even if you do not have excellent credit, there are still options to get low interest rate home loans!
It is possible to apply for a residential loan through Veterans Affairs (VA). VAs offer more flexible terms than traditional banks, so it is worth looking into whether or not they fit your needs.
You will need to show proof that you have made enough money in the past two years, but this can be done through documents such as pay stubs, tax returns, or receipts.
A lot of people make use of their workplace to gain access to extra income, so why not you? Many companies allow employees to take time off for personal matters like buying a house, so ask your employer if there is anything available through the VA.
More information about veterans’ benefits can be found at https://benefits.va.gov/benefits/
Make sure your debt to income ratio is good
It’s okay if you have less than perfect credit, but there are things you can do to improve it. You can take out loans or increase the amount of money in your savings before taking out a home loan.
Getting approved for a lower interest rate is another way to save money on monthly payments. And don’t forget about tax benefits when investing!
There are many different ways to pay for a house, and not all of them require very large amounts of cash up front. A personal loan from a bank may be more affordable than buying a car, for example. Or you could put down an investment that doesn’t cost anything until later, like renting a room at a friend’s house.
Weigh all of your options, and don’t feel like you have to spend lots of money upfront. There are plenty of other strategies to get ahead financially — even if you don’t have a ton of extra dough right now.
Check for any property you’d like to buy
It is your lender, not us, that requires proof of adequate credit. This includes verifying employment, checking references, confirming income, and ensuring there are no past loan or debt issues. They will also ask if you have ever been rejected for a home mortgage in the past.
It is very important to be prepared when going into this conversation! Make sure you have all the information they request ready. Don’t forget to check out our article about how to manage your money. These days it seems like every big company is offering online banking and bill pay, so try using those services to keep tabs on things.
Hopefully you now know some easy ways to get rid of most of your financial stress.
Make sure you have enough savings
A home is one of your biggest investments, so it makes sense to be smart about how you finance this investment. If you’re looking into buying or investing in a house, make sure you are aware of all the different loan options available.
A personal credit card can help with budgeting! Many lenders will let you use that as a down payment instead of putting up hard-earned cash.
By using a personal credit card, you get the convenience of having access to money immediately. This helps you keep track of spending and can reduce stress about being able to pay your bills at the end of the month.
Also, most major credit cards now offer mortgage loans. Some even offer zero percent intro monthly payments for people who can prove they’ll be responsible buyers.
These mortgage loans loans are not only great for first time homeowners, but also for those looking to upgrade their homes. By paying over time, owners save money in interest.
Find out what type of loan you would like
Like we mentioned before, there are two main types of home loans that VAs offer. These are referred to as purchase money mortgages or refinance mortgages. A lot of times, people confuse them because they look similar but one is more expensive than the other.
A personal credit line or second mortgage is not considered a house loan since you aren’t paying off your homes debt in monthly installments. It is typically much higher than a regular mortgage however!
What this means for you is that instead of getting a lower interest rate on a house loan, you get very large incentive due to the extra cash you are giving yourself by doing this.
This isn’t always the case though as some lenders don’t allow it.
Make sure you have your documents ready
As mentioned before, it is important to make sure that you are pre-approved for a loan before looking into which type of home loan is best for you. If you find out later after purchasing a house that you do not have enough money to close, finding a new lender may be difficult if you already have an agreement!
Most direct lenders will require proof of employment, tax returns, bank statements, and/or pay stubs. They will also want to know about any additional loans or credit cards in case they are learning more than one person is using your name. This can sometimes get tricky since many employers do not ask their employees about their personal lives.
By being aware of what documentation required for a loan we means you will have time to gather these things and be prepared when you apply.
Bring your documents to the bank
The next step in getting approved for a home loan with us is coming into our branch to meet with one of our mortgage professionals. You will need to bring these documents to prove you have adequate income, proof of residence, and enough money to pay this new house a visit.
We can’t say it any simpler than that! Luckily, we've prepared some easy steps for you here.
Tell them you want to apply for a loan
As mentioned before, it is your lender that determines if they will approve you as a home buyer. Therefore, what kind of credit you have and how well you manage those loans will play an important role in whether or not you get approved.
It is very common to be asked about recent large purchases while applying for a mortgage, but there’s another factor most lenders look at when determining if you are able to pay money down and maintain a house — debt. They consider monthly bills like rent or a house payment to be debts.
Many people spend their lives living with lots of credit card debt and student loan obligations, so being aware of these costs can help determine if you are eligible to take advantage of lower interest rates by paying off your house faster.