Your Path To Homeownership
Your Path To Homeownership
A VA loan is an excellent mortgage option you can use to purchase a property. This government-backed loan has generous terms and is available to eligible veteran and active service members, along with surviving spouses. Here’s what you should know about VA loans in Texas.
What Are VA Loans?
In 1944, the US Government created a law that offered a wide variety of provisions to qualified veterans, including loan guaranty for homes. Over the years, the VA loan program has evolved considerably and now extends its assistance to active duty service members and military spouses looking to purchase or refinance homes.
The United States Department of Veterans Affairs (VA) is responsible for setting the qualifying standards of a VA loan and laying down mortgage terms. However, it’s important to note that the VA doesn’t actually provide financing for the vast majority of VA loans. They simply guarantee a portion of the loan.
Private lenders like mortgage companies, banks, or credit unions are the ones that actually issue VA home loans. Homebuyers can secure more favorable terms from VA-approved lenders since the backing of a government agency assures lenders of protection against total loss.
While a VA loan may give the impression of being a specialized mortgage product, this shouldn’t discourage you from looking at VA loans in Texas. In most instances, a VA loan isn’t more complicated or difficult than other home loans and doesn’t even require a down payment.
How Do VA Loans Work?
Although the VA doesn’t issue the loans, they decide who is eligible for one and approve the lender that will provide financing.
VA loans don’t fall under conventional loans due to more lenient credit requirements. Those with a full VA loan entitlement can borrow the maximum amount that a lender is willing to give, often without the need for a down payment. If you are deemed qualified for a VA loan, you can complete your application process through your chosen lender.
If you are checking out VA loans in Texas, you may have noticed the different programs available. The VA offers several home loan types that aim to meet the specific needs of borrowers. Their programs mainly fall under either a direct home loan or a VA-backed loan.
VA Direct Home Loan
With this loan type, the VA serves as your mortgage lender. You will work with them directly when it comes to applying for and managing your loan. The Native American Direct Loan (NADL) is one such program that helps Native American veterans or non-Native American veterans with Native American spouses buy a home on federal trust land.
VA-Backed Home Loan
Programs under this include VA Purchase Loans, Interest Rate Reduction Refinance Loan (IRRRL), and Cash-Out Refinance. A VA-backed loan is one wherein the VA guarantees or stands behind a portion of a borrower’s loan from a private lender. If the borrower ceases to make payments, the VA lets the lender recover some or all of the losses. This assurance reduces the risk for lenders and makes them more likely to offer loans.
Keep in mind that in addition to following VA standards when providing VA-backed home loans, lenders may also have their own standards that borrowers must meet. For instance, you may need to pay for a home appraisal or have a certain credit score.
Why Do You Need a VA Loan?
One of the best things about a VA loan is its 0 percent down payment option. This is welcome news if you only have room in your budget for mortgage payments and not a down payment. It also means you can allocate more funds to other areas, such as savings and home furnishings, instead of using it as money upfront. What’s more, you can also save a certain percentage of your loan amount every year since you won't have private mortgage insurance (PMI), which conventional lenders typically require when borrowers put less than 20 percent down. Instead, you pay a one-time funding fee, which you can pay upfront or finance as part of the loan.
Interest rates are also generally lower than other mortgage loan options, even with similar terms, since a VA loan carries a lower risk for lenders. This is especially helpful if you have credit issues, although your lender will still verify your ability to repay your loan. Borrowing requirements are also more lenient in VA loans than other options, and disabled veterans are given additional benefits.
Finally, closing costs are limited in VA loans because the VA restricts the fees and expenses normally associated with getting a mortgage loan. The lender’s origination fee should not exceed 1 percent of the loan amount. Lenders are also prohibited from charging certain closing costs, such as settlement fees, mortgage broker commissions, and prepayment penalties.
While VA loans in Texas may seem to be attractive mortgage options, every homebuyer’s situation is unique. Educating yourself and carefully going over all your choices helps in making the financial decision that is right for you.
Let us assist in checking your eligibility for VA loans in Texas. The Empower Group will match you with a loan that suits your needs and make sure you get the most from your loan program. Start your loan with us today by clicking the APPLY NOW button.