Whether you’re a first time buyer or you finally get to move into your dream home, sifting through and understanding the many ways you can finance your property can be dizzying. Pair that with the proper mortgage best suited for your financial needs, and the situation can seem like a mountainous challenge.
Fortunately if you’re a Tennessee veteran, active service member, or spouse thereof, often the most advantageous solution you may find is with a Veteran Administration Mortgage Loan. VA Loans, which are insured by the federal government, were created to reward our military service members for their service to this country. Here are some of the benefits to VA loans for Chattanooga military personnel.
Why Consider a VA Mortgage for Your Chatanooga Home?
Active and former members of the United States Armed Forces provide our nation with an immeasurable service. It is widely thought that the monetary compensation they receive is less than desirable, though, when weighed against their sacrifice. The average annual salary for the US Army in 2021 was $30,000; not the most desireable income to save for your first home.
However, the government offers numerous military relief programs, such as VA loans, to compensate for what they cannot offer monetarily. By design, a VA mortgage loan can provide veterans with relief no other loans can match, so it’s in every active and former military member’s best interest to first research VA lenders in Hamilton County.
Veterans Easily Qualify for Home Loans
Getting turned down by multiple lenders is easily one of the more frustrating aspects of being a first time home buyer. You are often required to have a sizable downpayment, a credit score around 650 or greater, and be looking for a home with a low loan-to-value ratio. The upside here is that VA loans loosen the eligibility criteria instantly for veterans and active service members; making lenders more lenient to your borrowing needs.
A Lifetime of Eligibility
After you have earned your eligibility for your VA Home Loan, it is with you forever. Whether you served 10, 20, or 60 years ago, you can always qualify for a VA loan as long as you are borrowing for your primary residence. And the US Department of Veteran Affairs doesn’t forget about spouses either. If you are a spouse of a service person killed in action and have not remarried, you may qualify as well.
To check your eligibility, first obtain your DD Form 214. A VA approved lender can then request your VA Certificate of Eligibility for you or you have the option to request it directly from VA’s eBenefits website.
No Down Payment? No Problem.
Conventional mortgage lenders often require a good sized down payment before even considering to give you a loan. Many lenders ask for around 20% or more of the total home value; sometimes an unattainable goal for the young or first time homebuyer.
Saving as much as possible for your down payment is strongly encouraged because the more you pay upfront the more you save in the long run. Notwithstanding, VA loans are primarily available with absolutely no down payments. This is possibly one their best advantages and has helped over 1.2 million personnel to take advantage of VA loans to become happy homeowners.
Avoid Paying PMI with a Chattanooga VA Loan
With so many lending options available, you may qualify for a loan even with a small down payment. This does come at a cost, though, and is known as Private Mortgage Insurance (PMI). PMI is a style of mortgage insurance which protects the lender until you are able to pay off a percentage of your mortgage; usually around 20%.
Private mortgage insurance can add anywhere between half a percent to one percent to your mortgage bill. So, if you owe $200,000 on your mortgage, your yearly PMI could cost upwards of $1000 to $2000 in a calendar year. But with a VA loan, your PMI is waived; making that $2000 yours to add to your child’s education, make improvements to your new home, or use to invest smartly.
You Pay Less Interest with a VA Loan
Banks or mortgage marketplace lenders try to attract new clients by advertising their best rates possible. But these rates are rarely available to those with less than ideal credit or those who can only offer a small down payment.
VA Loans, on the other hand, offer some of the lowest interest rates available nationally without regard to one’s current financial situation. A low interest rate not only lowers your monthly mortgage bill, but also allows you to pay off your house in a timely manner.
How Much Can I Borrow in Chattanooga with a VA Loan?
The national VA loan limit is a healthy $548,250. As the average cost of a house in Chattanooga is $204,382, you could buy a pretty impressive home in Hamilton County. With a VA loan, you may be able to borrow even more depending on your zipcode, as the VA notes some areas are spendier than others.
Home seekers should understand they may not be able to borrow up to the VA loan limit. Traditional lenders base their amounts on various factors; including your debt-to-income ratio and if your prospective home is financially viable in relation to your income. They look primarily at two major factors; is this a smart investment for them and can you afford your monthly mortgage.
Save Your Money for Closing Costs
A common misconception among many VA buyers is confusion around a 0% down payment and a 0% cost loan. With so few houses on the market, today’s real estate industry is in favor of the seller, not the buyer. Sellers rarely cover a buyer’s closing costs, so a VA buyer should prepare to cover their own loan costs. In any case, they should at least be prepared to go slightly above their offer to include the closing costs.