What is a VA Loan?

If you’re like many people, you’ve heard of VA loans – but is it possible to buy a luxury home in Boston by using one? This guide explains.

VA Loans, Explained

Contrary to popular belief, VA loans don’t actually come from the Department of Veterans Affairs. Instead, the Department of Veterans Affairs (VA) guarantees some or all of the funding. That means private lenders don’t have to worry as much as they ordinarily would when they let you borrow money to buy a home. As a result, you get access to more favorable interest rates and terms then you may be eligible for without using a VA loan.

Not everyone qualifies to use this type of funding to purchase a home, but for those who do, the benefit can be a great deal. The following sections outline the benefits of using a VA loan, eligibility requirements, and the most common questions about using VA loans to purchase homes in Boston.

Benefits of Using a VA Loan

VA loans come with several benefits for those who qualify, including:

No down payment required
Competitive interest rates
Limited closing costs
No private mortgage insurance requirement

Here’s a closer look at each.

No Down Payment Required With VA Loans

The VA doesn’t require you to come up with a down payment in order to use its loan guaranty. however, some lenders may require you to come up with a down payment. But the bottom line is that it’s not a VA requirement, and if you choose to purchase a home with nothing down, you may do so without penalty.

Competitive Interest Rates on VA Loans

Because the VA guarantees these loans (they’re government-backed), lenders know that if you default on your payments, they’ll be able to recoup at least part of their losses. That means people who wouldn’t ordinarily qualify for mortgage loans and those who would only qualify for high interest rates can qualify under the VA home loan program.

lenders still have minimum credit score requirements, but the VA doesn’t impose them. There is no minimum credit score required, at least on the VA’s behalf, to take out one of these loans.

VA Loans Feature Limited Closing Costs

The VA limits the amount of money a lender can charge you in closing costs when you use your VA home loan benefit. Additionally, the VA allows sellers to pay some or all of the closing costs in a transaction. That means you may truly be able to buy a home with nothing down.

Lenders Can’t Make You Buy Private Mortgage Insurance When You Use a VA Loan

Usually when you buy a home with less than a 20 percent down payment, your lender will require you to purchase private mortgage insurance, or PMI. Private mortgage insurance protects the lender, not you, but you have to pay for it. This insurance kicks in if you default on your payments; It pays your lender a certain amount so the lender can minimize its losses.

However, with a VA loan, lenders are not allowed to make you buy PMI. That’s because the VA guarantees these loans and will help the lender minimize its losses if you default on your payments.

Who Qualifies for a VA Loan?

The VA is very specific about who qualifies for these types of loans. You must have served during a specific time period, or you must be a qualifying dependent. Because these qualification requirements are subject to change, it’s a good idea to contact the VA if you think you may be eligible. A VA representative can tell you whether you qualify.

Common Questions About Using a VA Loan to Buy a Home in Boston

Check out these common questions about using a VA loan to buy a home in Boston. If you don’t see the answer to your question here, your lender or the VA’s home loan website may be able to give you the information you need.

Is There a Limit on the Amount You Can Borrow Using a VA Loan?

There’s currently no limit I’m the amount of money you can borrow using a VA loan, but there are some exceptions. In order to qualify for alone with no limit, you must never have used your home loan benefit before or you must have repaid a previous VA loan in full. That doesn’t mean you can get any size loan you want, though. Your lender will still have a maximum amount it will allow you to borrow.

Can You Only Use Your VA Loan Benefit Once?

You may use your VA loan benefit as many times as you’d like. However, you usually must pay off one VA loan before taking out another period there are some exceptions, such as when you use your benefit to purchase a second home. However, VA loans for second homes are subject to a wide range of restrictions and requirements, and they’re not actually that common.

What Does “Assumable” Mean With a VA Loan?

VA loans are assumable, which means that if another person who’s also eligible for a VA loan comes along and wants to buy your home, they can simply take over your payments. However, that person is subject to eligibility requirements and credit checks.

How Do You Get a Certificate of Eligibility for a VA Loan?

You can get a Certificate of Eligibility, or CoE, directly from the VA. You must apply by logging into the VA’s website. After you have your CoE, you may take it to your lender to show that The VA is willing to back your mortgage loan.

Are You Buying or Selling a Home in Boston?

If you’re searching for a luxury home for sale in Boston, or if you’re selling your home, we can help. Call 617-967-5271 or get in touch with us online so we can discuss your needs. In the meantime, please feel free to browse our listings in the following communities: