3 Benefits about VA Loans that You should Check out with Your Low Credit
VA loans are not only popular for serving veterans and military service members, but these programs are also well-known for the benefits. Maintaining a good credit score is no easy task for former or active-duty military borrowers. The Department of Veterans Affairs allows buyers to apply for the home loan with their not-so-stellar credit scores. As you can see, the fact of applying for a loan with 550 is a remarkable thing for every eligible borrower.
Of course, you must have heard that the VA loans do not have credit score requirements. There is no doubt that you would get confused. Due to a troubled financial situation, the lenders make sure whether you can repay the loan. The VA insures the lenders. For this reason, the lenders can also allow flexible credit guidelines. Often, poor credit scores do not have the final saying – lenders check other factors to allow the mortgage.
Despite allowing a low credit score for VA loan in Houston, the program assures multiple benefits to eligible buyers. Let’s read over the important advantages mentioned below.
Low Credit Scores are Very Much Welcome
Credit score plays an important role in deciding your interest rate. It is absolutely possible to obtain eligibility with bad credit. However, lenders are never ready to allow borrowers with credit scores below 550. No matter how competitive the VA loan rates are, a low credit score indicates high interest. Before sitting down with a lender, monitor your credit report and score. From wrong entries, missed bill payments, to maxed-out cards, a lot of things could drag your score down. The credit score can be fixed, but you need the patience to be rewarded with an affordable rate.
Save Money by Not Paying PMI
If it were an FHA loan, you would have to shell out a hefty amount for private mortgage insurance. Low down payments also ask for private mortgage insurance. Generally, PMI is necessary for borrowers who can only put down less than 20% of the loan value. In addition to it, PMI is added when the loan-to-value ratio is above 80%. The payment is made to protect the lender if you default on the loan. VA mortgages have additional financial support from the government-backed agency. This eliminates the need for PMI. The benefit can save around $100 or $200 every month.
Flexible Requirement with Funding Fee
Every mortgage demands closing costs or other types of fees. VA loans are no different. Nevertheless, this loan offers an affordable funding fee. The funding fee refers to a percentage of the loan value, and it is usually between 1.25% and 3.3%. The U.S. Department of Veterans Affairs covers the loans that end up in foreclosures. This is also considered as a contribution to run the loan program. Borrowers can unlock flexibility in paying the funding fee. You can pay it at closing or add it to the loan amount.
So, are you ready to apply for a VA loan with bad credit in Houston? Find a lender now!