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What is a VA Loan?


Buying a home is one of the biggest investments you’ll make in your lifetime. There are many things to consider that make this process very stressful and overwhelming. If you are a veteran or serving in the military it  can be more of a challenge compared to the average person. Luckily, there is a unique and powerful loan program specifically for veterans and military home-buyers: the VA loan.

What is a VA Loan?

A VA Loan is a loan issued by private lenders and backed by the U.S. Department of Veterans Affairs. This loan assists U.S. veterans, active duty service members, and widowed military spouses buy a home. Although they’ve been around since 1944, they have become increasingly more popular in the last decade. There are many reasons this loan is an attractive option for individuals who qualify, including the fact that it is relatively easy to qualify for and doesn’t require a down payment in many cases.

How does a VA Loan work?

Unlike traditional mortgages, VA loans are specifically guaranteed by the government. This means that the government will agree to repay a portion of the loan to the bank if you are unable to do so (either as a result of default or foreclosure). This is what makes the VA loans less of a risk for financial institutions and easier to qualify for as a borrower. 

Do I Qualify for a VA Loan?US army veteran family in new house

There are generally three categories that determine your eligibility for a VA Loan. These categories align with the VA’s service requirements:

  • Active duty service member or honorary discharged veteran with at least 90 consecutive days of active service during wartime or 181 days of active service during peacetime.

  • Spouse of a service member who died in the line of duty or as a result of a service-related disability

  • Served more than six years in the National Guard or Selected Reserve

Keep in mind, there will be an application process that may require a Certificate of Eligibility that will ensure your eligibility for a VA loan.

What are the Benefits of a VA Loan?

There are a variety of benefits with a VA loan if you are eligible for this product:

  • You could be eligible to buy a home with no down payment. VA loans are one of the last 0% down home loans on the market today.

  • Depending on where you live, your approved loan limit could be higher than a conventional mortgage. Currently, in Pittsburgh and most of Pennsylvania, the loan limit is $484,350 for a VA loan. With the 2019 VA Loan Limits, borrowers in high-cost areas may be able to purchase homes exceeding $484,350 without putting money down. To determine what the loan limit is in your area, visit: Veterans United Home Loans. Additionally, these limits will be changing January 2020. For more information on how that may impact you, check out this article.

  • Private Mortgage Insurance (PMI) is not required. Since the loans are backed by the government, PMI is not required.That could save you a chunk of change each month off your mortgage payment.

  • There are  generally no minimum credit score requirements. Although there are no minimum credit scores required through the government for this loan, most lenders, including SSB, will require at least a 620 credit score. 

  • There is no prepayment penalty. If you pay off your loan early, there is no penalty.

  • There is no need to be a first-time home-buyer. As long as you pay off your loan each time, you are eligible to get another VA loan.

What are the Drawbacks to a VA Loan?

Although there are many benefits, there are some things you should consider that could make a VA loan less desirable than other lending products:

  • VA loans require a VA loan funding fee. This fee is typically between 1.25% and 3.3% of the loan amount. This will be added to your monthly payment and interest you pay over the life of the loan.

  • A VA loan can only be used to buy or build a primary residence or refinance an existing loan. This type of loan cannot be utilized to purchase an investment property.

  • Only certain types of properties are eligible for a VA loan. If you are looking to purchase vacant land or a co-op, this loan won’t help you.

Is a VA Loan Right for Me?

There is no clear-cut answer for this question. Even though you are a veteran, a VA loan may not be the best option for you based on your individual situation. It is important to talk with a mortgage specialist to discuss your financial situation, your goals and your budget to determine if a VA loan will best support all those pieces. VA loans are a great product for veterans who qualify, but it is always important to educate yourself on every option and determine what’s best based on all things considered.

Get a VA Home Loan Quote

heather diekkman | SSB Bank mortgage specialist
Even if a VA loan isn’t the right loan for you, it is possible that there are other loan products that may actually put you in a better financial situation. 

If you want to learn more about VA loans and how to determine eligibility, contact our Mortgage Specialist, Heather Dieckmann. She would be happy to educate you on the product, as well as our other options, and walk you through the steps to get you into your new home.