What Are the Rules for a VA Loan?

What is a VA Loan?

A VA loan is a mortgage offered to veterans, active service people, or surviving spouses so that they can buy a new home, build a home, make home improvements, or refinance. Private lenders and mortgage companies provide VA loan options. Before pursuing a VA loan over another financing option, it’s important to know the pros and cons.

Backed by the Government

Although you will obtain your loan through a private lender, the United States government will back the loan. This means that the government protects and secures your mortgage against default. While that may sound great, it also means that you may have to meet some VA loan rules like a higher credit score, and your new house will need to meet specific safety requirements. Depending on how you see it, government backing is a pro and a con of VA loans.

Fewer Upfront Costs

This is the biggest pro of VA loans—they require fewer upfront costs. You can obtain a VA loan with zero down payment. Even FHA loans can’t offer that.

Not only is the down payment waived, but VA loans also do not require private mortgage insurance. They tend to be more lenient regarding your debt to income ratio (DTI) for qualification, too. These VA loan rules make the option especially attractive to first-time home buyers.

Primary Residence Only

With a VA loan, you can always rely on having a primary home. You can buy, improve, or refinance your primary residence with a VA mortgage, like a single-family home, condo, or farmland that includes your main house.

A con of VA loans, however, is that the program has limitations beyond that primary residence. Under VA mortgage rules, you cannot use a VA loan for a second home, co-op living situations, or business ventures, like apartments that you rent out. The loan is for a home located in the U.S. or surrounding U.S. territories. Houseboats and RVs do not qualify for a VA loan as states consider them to be personal property.

Use Cake for Your VA Loan Today

VA loans have many pros and cons, but they can be great options for those who have served our country and need assistance finding or keeping permanent residency. Cake supplies new VA home mortgages and refinancing to qualified applicants. If you are a veteran or surviving spouse looking to make a change in your home, call our Cake Consultants to discuss your dream home.