Like the rest of the country, Iowa has experienced a rise in home prices. The typical home value in Iowa is $180,839, a 12.5% increase over the past year, according to Zillow. To qualify for a conventional mortgage with no private mortgage insurance (PMI) requirement, you’d need to put 20% down. That amounts to about $36,000 for a typically-priced home in Iowa. For first-time homebuyers in particular, saving for such a big down payment can be challenging. That’s why a VA loan, for eligible service members and veterans, can be an appealing alternative to conventional mortgages. VA loans offer up to 100% financing (meaning no down payment) and other benefits that we’ll cover in this article. Keep reading to learn more about VA home loans so you can decide if it’s the right home financing option for you.
What are the VA Home Loan Programs?
First, learn about the different loan options you may be eligible for as a veteran or active-duty servicemember:
- Purchase Loan: VA-backed purchase loans can be used to buy, build, or improve a home.
- Native American Direct Loan (NADL) Program: NADL loans can be used to buy, build, or improve a home on federal trust land, such as The Meskwaki Settlement and the Omaha and Winnebago nations in western Iowa.
- Interest Rate Reduction Refinance Loan (IRRRL): Replace your current VA-backed home loan with a new one in order to reduce your monthly payment.
- Cash-out refinance loan: Get cash out of your home equity or refinance a non-VA loan with a VA-backed mortgage.
Now that you know your options, let’s check your eligibility.
Am I eligible for a VA home loan?
The first step in determining your eligibility is to apply for a Certificate of Eligibility (COE). You can check service requirements here or apply online through eBenefits. Once you have your COE, you’ll just need to meet your lender’s credit and income requirements for loan approval. You also have to live in the home you are purchasing with your VA loan.
Contact our Iowa-based mortgage lenders with any questions you have about VA loan eligibility.
What are the unique benefits of a VA home loan?
Once you determine your eligibility for a VA-backed home loan, you need to decide if a VA home loan is right for you. Learn the unique benefits that come with VA-backed mortgages:
1 - No down payment required
This is probably one of the biggest benefits. With a VA loan, you can finance 100% of the house purchase price and avoid a down payment entirely. This is the only mortgage program that lets you put less than 20% down (or nothing down) without requiring you to pay mortgage insurance premiums. However, traditional mortgage term and rate options like fixed-rate and ARM loans are still available for your VA loan. For first-time homebuyers in particular, it’s a great opportunity to buy a home in an affordable way.
2 - Eligibility for additional grants
The Iowa Finance Authority offers a $5,000 grant for down payments and closing costs through their Military Homeownership Assistance Program. This can be combined with the IFA’s $2,500 first-time homebuyer grant as well, if you’re using the VA loan to buy your first home.
3 - Competitive interest rates
Because they are insured by the federal government, VA loans carry less risk for lenders, so they can offer lower interest rates on VA loans than traditional mortgages. Contact our Iowa-based mortgage lenders with any questions you have about current rates on VA loans.
4 - Avoid paying private mortgage insurance
Private Mortgage Insurance, also known as PMI, is usually required by mortgage lenders when you obtain a conventional mortgage loan with less than 20 percent down. Once you reach 20% equity in your home, you may be able to drop the PMI requirement, but until then you’ll pay for it in monthly premiums added to your mortgage payment. So, you can save money on your mortgage payment by getting a VA loan and not having to pay PMI.
5 - No prepayment penalties
Some mortgage loans come with a prepayment penalty attached, which is a fee charged if you pay off your mortgage early or within an initial period of years. VA loans don’t have a prepayment penalty, so you can pay off your mortgage early if you want to or if you end up selling your house.
What do I need in order to apply for a VA mortgage loan?
Lincoln Savings Bank is proud to be a VA-approved private lender. To apply for a VA loan, fill out our online application or visit your nearest location in Central and Northeast Iowa to meet with one of our local mortgage lenders. In addition to having your COE, you’ll need to provide documentation of basic information such as your name and address, social security number, income, and more. We can help you with the process and answer any questions you may have.