Interested veterans may be concerned about private mortgage insurance (PMI) and if it’s required with a VA loan. The following information will help you to better understand VA loans and PMI.
What is a VA Loan?
Potential homeowners have many loan options available when they’re getting ready to buy a home. The VA (Veteran’s Administration) loan is a very popular choice for eligible individuals.
A VA loan helps veterans purchase a home without many of the requirements of conventional home mortgage loans. VA loans are guaranteed by the government. So many lenders are more willing to provide financing to potential buyers. Home buyers are typically required to provide a down payment of up to 25%. However, this is not the case with VA loans because of the government guarantee.
If the veteran cannot pay for the loan, the bank is not stuck with the loss. The VA will pay the balance. Because of this guarantee, VA loans generally come with lower interest rates and better terms. This makes them very popular options for eligible individuals
The maximum loan amount for a VA loan is $424,100. Of this amount, the VA will guarantee up to $104,250, which is 25%. The following list of individuals are eligible for VA loans:
• Reserve members
• Active-duty personnel
• National Guard members
• Spouses of veterans
Dependent children are not considered eligible.
What About Private Mortgage Insurance or PMI?
PMI or private mortgage insurance is a type of insurance homebuyers must purchase for conventional home mortgage loans. The purpose of PMI is to guarantee the lender that they will get their money even if the homeowner should default. It may be required up front at the time of the loan signing. It also may be added onto the loan. This can really increase the amount of the monthly mortgage payment. PMI can become very costly to the homeowner.
One of the great things about VA loans is that PMI is not required. The loans are already guaranteed by the government. This benefit is equally as important to potential homebuyers as the no-down payment benefit.
How Do I Get a VA Loan?
Obtaining a VA loan can be easier than one might think. Although homebuyers still need to be approved, the process is relatively simple and uncomplicated. Below are the steps potential homebuyers must take.
• Determine your eligibility to obtain a VA loan
• Find a home to buy
• Find a lender and show them your VA loan Certificate of Eligibility (COE)
• Provide the lender with income and employment information for credit approval
• Fill out an application
Your VA loan may be approved on the same day. Once it is, the lender will arrange for an appraisal to be done on the property. You will not have to do anything until the day you come in for closing.