How powerful is the VA loan?

[Jerome Boudreaux]

I hear a lot of people mention how powerful the VA loan is and the more people I ask the more I realize no one can give me good in depth answers. Their answers are always along the lines of "no money down" or "you can use it basically an unlimited amount of times". I'm reaching out to BP to get good in depth answers about how powerful the loan truly is as I have tried to find podcasts/books and can't find any good ones. (If you have any books or podcasts with more information please include them as well).

[Patrick Roberts]

VA loans are an excellent tool. Typically, VA interest rates are better than other loan options of similar terms. Also, VA loans allow for 100% financing with no PMI, and are more forgiving in low/moderate credit score scenarios. One of the more overlooked downsides is the funding fee; however, if you have a service-connected disability rating, the VA funding fee is usually waived.

Another neat little piece of VA loans is that they can allow for higher DTI ratios than conforming/fha loans because they primarily rely on residual income and not directly on DTI (it's complicated, but this will do for now). I've seen VA loans close with backend DTI ratios in the 60s and low 70s.

VA loans can be used for multifamily purchases with 0% down as long as the veteran will live in one of the units. Just be aware that there is an experience requirement for these, as well as reserves requirement (6 months PITI).

Another neat piece is the IRRRL, which allows for cost-effective refi's (similar to R/T) if rates ever drop.

If you're househacking and are a qualifying veteran, these are typically better loan options than conventional/fha in low-downpayment, high DTI, or low credit scenarios. If you have a large downpayment and arent getting a waiver for the funding fee, I would price a VA against conventional conforming to see how they compare.