Confused between VA loans and Conventional Loans? Here’s Some Help

Buying a home in Texas may top your list of New Year resolutions. The colorful culture, mouthwatering food, the plethora of employment opportunities and of course attractive homes, makes this state a dream destination to settle down in for many Americans. However, one of the major hurdles that prospective homeowners face is financing the entire investment, especially if you are an active military member or veteran.

This is where VA home mortgage loans play a crucial role. Despite the numerous advantages that VA loans offer, it has been shown that many veterans don’t apply for one. In 2004, VA loans accounted for only 2% of all mortgage loans in the U.S. The scenario improved in 2014, as the number increased to 8%.

One of the key features of VA loans is that it doesn’t require any down payment. Also, the VA loan rates in Texas are quite competitive as compared to conventional home loan programs. For instance, you may get a conventional loan with a low down payment, but the interest rate will be higher due to the higher risks involved.

Why VA Loans?
Here are just a few reasons you might want to choose a VA loan over a conventional loan:

No Downpayment - In recent times, lenders are asking for 10%-20% down payment for a conventional loan. VA loans are backed by the federal government, as a result, banks don’t require a down payment.

No PMI – A VA loan is backed by the government so that lenders don’t need private Mortgage Insurance (PMI) in the loan amount. This is an added expense that is required for conventional loans.

Lenient Qualification Standards - The qualification standards vary for different loans. The government-backed VA loans have less stringent qualification standards as the banks assume less risk.

Assigning an Interest Rate
There are several factors that are evaluated when assigning an interest rate for VA loans. Credit score, loan amount and lender’s fee charged to the veteran and the tenure for which you need the loan are some of the essential factors that are considered. VA loans don’t require a specific credit score but most lenders ensure that it is not lower than 620. A higher credit score ensures a better loan interest rate.

The lock-in period also plays an important role in determining the loan rate. The rates on the loan can vary from day-to-day, and at times even intra-day. This is the reason why it is essential to get the rate quotes on the same day and time.

Qualified Mortgages and Its Impact on the VA Loan Borrowers

There’s a new type of loan called the ‘Qualified Mortgage’. Most of us have heard of it, especially prospective homebuyers who question the impact that it will have on their home mortgages. For example, retired or active duty military servicemen are speculating about the impact that these changes will have on their ability to get the benefits of a VA home loan.

The financial slowdown of 2008 led to the introduction of numerous stringent rules and regulations. This was done to put restrictions on giving away easy loans and to reduce the possibility of loan defaults. However, such restrictions have made life difficult for borrowers who are looking to buy a home. At the same time, the government has been implementing and modifying new mortgage policies to provide relief to these borrowers, and a Qualified Mortgage is one of them. There are some specific policies that have been implemented by certain U.S states. The perfect example would be the various programs and initiatives being taken by the government in Texas; especially its impact on the veteran home loan in Texas.

What is a Qualified Mortgage?
Qualified mortgages mainly focus on the safety and affordability of prospective homebuyers. During the 2000’s, many lenders provided mortgages to a large number of borrowers who had poor credit scores and who were not in the situation to pay back the loan. These subprime loans were the main reason that contributed to the financial meltdown and led to the collapse of the housing market.

The scenario mentioned above eventually led to the introduction of the qualified mortgage. The qualified mortgage does not have the risky features of other mortgages and it ensures that the borrowers can afford to repay the loans that have been sanctioned. Regulators have also laid down eight credit and underwriting requirements that must be met to obtain Qualified Mortgage status. Mortgage companies can still provide loans that do not meet the standards of a qualified mortgage, but those loans will not get protection as per this regulation.

The Effect on VA home loans
People who are worried about the impact that qualified mortgages will have on VA loans have a reason to smile. The good news is that it will not have much impact on the VA loans. These underwriting guidelines have been followed by most of the lenders over the years. Hence, no additional action needs to be taken to comply with these underwriting requirements.

In fact, VA loan borrowers will get some added advantages as it will limit the costs involved in obtaining a mortgage. It has been estimated that around 92% of the loans that have been taken out meet the requirements of a qualified mortgage. The other 8% of the loans either exceed or have a higher annual percentage rate (APR) than allowed. This shows that the new guidelines will not have much impact on a majority of home loans.

Qualifying For A VA Home Loan in Texas

Despite the Department of Veteran Affairs offering lucrative terms on home loans, not even 12% of military veterans have taken advantage of it. The primary reason for such low participation is that many veterans are unaware of the loan programs and if they qualify. Most have instead opted for loans offered by the Federal Housing Administration (FHA). However, with the sharp increase in mortgage insurance premiums on FHA loans in 2014, the demand for VA loans has risen.

To apply for a VA Loan you will have served in the Army, Navy, Air Force, Marines, National Guard or Coast Guard for a minimum of 90 days. Additionally, for VA Loans in Texas, you must meet the following criteria:

• You are an active military serviceman looking for a permanent change of station (PCS) to Texas
• You are an active military person and already living in Texas
• You had a home in Texas when you entered the military
• You had a home in Texas when you left the military
• Your home has been in Texas for at least a single day
• You intend to use the home as the primary residence

If you satisfy the above criteria, you may be eligible to apply for a VA home loan. If you are retired, be ready with your DD214 Form to apply for the loan. If you are an active military person, a statement of service will be needed to start the application process.


If you are a veteran, you deserve all of the benefits a VA Loan has to offer. Contact one of our VA Loan experts today to learn more.

Source: http://davidsongroup.net/mortgagepedia/posts/qualifying-va-home-loan-texas/

More to VA Loans Than Competitive Loan Rates

The advantage of taking out a Veteran Affairs (VA) loan is quite far reaching. The main purpose of this loan is to make life easier for active duty or retired military personnel. That is why lucrative benefits are offered to them through this program, which includes providing a guaranty on loans of up to 100% value of the property that they choose to buy. Even the funding fee from 0% to 3.15% that may be required for this loan can be financed by the Department of Veteran’s Affairs. This mortgage also provides another key benefit of zero down payment. Also, in terms of interest rates, among all the states VA loan rates in Texas are lower due to the support provided by the state.

There are some conditions to fulfil in order to get financing for a home loan under the VA mortgage program. The price of the house should not be more than the reasonable value as assessed by the department. So, the down payment will be waived only if the sale price of the house does not exceed the appraised value. However, unlike the FHA loan offered to other citizens, the veterans are not required to pay monthly insurance premiums.

Some other benefits of taking out VA loans include limiting closing costs, having a provision to allow sellers to pay closing costs, no prepayment penalty for early loan payoff and the guaranty provided by the VA department if borrowers find it difficult to make payments.

We at the Davidson Group can assist you with your VA loan needs. Our experienced loan officers can walk you through your options, and manage the complicated paperwork and official proceedings on your behalf. Over the years, we have helped hundreds of active-duty and retired military professional. We believe our veterans deserve the highest respect.

Source:  http://davidsongroup.net/mortgagepedia/posts/more-va-loans-competitive-loan-rates/