10 Must-Know Things Before Applying for a VA Insurance

Veterans Administration (VA) insurances are among the most common types of insurances used in the financing market today. They provide many benefits to qualified borrowers and are primarily used to purchase, refinance and even home improvement.

Here are 10 important things one should know before applying for a VA insurance:

1) A secured insurance. A Veterans Administration insurance is a secured insurance from the United States Department of Veterans Affairs, which means that the lender providing financing to the borrower is protected from loss if the buyer fails to repay the insurance.

2) Not everyone can qualify for a VA insurance. One needs to be experienced or active duty service personnel in order to qualify for VA financing. Veterans can apply for VA financing with any mortgage lender that participates in the VA Home Insurance Program, and a valid Certificate of Eligibility (COE) must be presented along with credit and income requirements in order to qualify for the insurance.

3) Offers lower-than-normal rates to eligible veterans. With a VA insurance, the borrower typically receives a lower interest rate than is typically available with other types of insurances. Also, a VA insurance can be used to get lower rates on refinancing up to 100% of the insurance amount.

4) It provides more flexible credit guidelines. The minimum acceptable credit score for a VA insurance is about 620, however, depending on unique circumstances, some lenders may accept a credit score as low as 550. Also, although other types of insurances may offer similar credit score guidelines, the credit score 620 For a conventional insurance or FHA insurance, there will be more obligations to the borrower and a larger down payment will be required.

5) No Private Mortgage Insurance (PMI) required on VA insurances, the program can also be used to unlock MI on other insurances. For example, one can refinance an existing insurance by changing their insurance program to a VA insurance, thereby eliminating PMI and reducing monthly mortgage payments. Although mortgage insurance is not required for VA insurances, the VA charges a finance fee to issue a security to the lender against the borrower’s default on the mortgage; However, unlike PMI, which is present for the life of the insurance on other types of insurances such as FHA and USDA, the FF may be paid in cash by the buyer or seller, or may be financed in the insurance amount. There are also lender-funded finance fee credit options available on VA finance if up to 3.3% is requested, and some veterans may be exempt from paying a finance fee on their insurance (additional documentation required).

6) Veterans Administration insurances do not require a down payment. A VA insurance usually does not require a down payment, however, if the insurance amount exceeds the VA limit for the county in which the property is located, the borrower will have to make a down payment. The down payment will vary depending on the amount of the borrower’s remaining VA benefit and the purchase price or appraised value of the home and will constitute a percentage of the difference between the two.

7) A person may qualify for more than one Veterans Administration insurance at the same time. There is no limit to the number of VA insurances one can take out at once as long as there is a remaining VA entitlement to use. For insurances over $144,000, the maturity amount is typically 25% of the VA financing limit for the county in which the property in question is located.

8) There is no prepayment penalty on Veterans Administration insurances. Any VA insurance can be paid off in full at any time which is a great advantage because it can help one save huge amounts of money on interest.

9) The spice period for bankruptcies, foreclosures, or short sales is shorter for VA insurances than for other types of insurances such as conventional or FHA insurances. In most cases, one can qualify for a VA insurance after 2 years of filing for bankruptcy or foreclosure on their home as opposed to the 4-year period for bankruptcy and 7-year foreclosure on a conventional type insurance.

10) It can only be used to purchase basic housing. VA benefits cannot be used to purchase a second home or investment property; However, it can be used to refinance a previously occupied VA insurance as a primary VA IRRL.