Rent vs. Own with a VA Loan

Rock-bottom home prices and low interest rates help make owning a home with a VA loan more affordable than renting.


Many people affected by the economic slump are forced to rent rather than own a home. It's become a landlords' market in many parts of the country.

In Trulia's Rent vs. Buy Index, it was reported that it's cheaper to own than rent in 98 of 100 largest U.S. cities. As home prices have been falling, rent has been rising. Today, it can cost 15 to 20 percent more to rent in some areas.

Falling home prices and historically low interest rates may make now the best time to buy a home. And, a VA loan can help military borrowers achieve this dream. Additionally, 3 great features of VA loans support why owning trumps renting in most housing markets.

1) VA loans have relaxed qualifying

Straightforward qualifying standards for VA loans help lenders determine whether an applicant is a satisfactory credit risk. According to VA guidelines, borrowers can have no higher than a 41 percent debt-to-income (DTI) ratio. The VA also provides lenders with a handy residual income table, which shows the exact amount borrowers must have left over after regular monthly expenses to afford their loans. And, since the VA does not require a minimum credit score for qualifying, lenders are known to approve VA loans for people with lower credit scores if they can show they are able to pay back the loan.

2) No down payment required for a VA loan up to $424,100

A VA loan can be obtained with no money down up to conforming loan limits. In most cities across the country, the conforming loan limit is $424,100, but can be higher in high-cost areas. For example, an eligible borrower could obtain a home in Orange County, California for over $600,000 with no cash down. VA-eligible borrowers need not worry about coming up with enough cash for a down payment on most home purchases. Almost all other loan programs require 3.5 to 20 percent down. The federal guarantee provides added security on a VA loan, so lenders don't need to require that down payment to be made.

3) Make "green" upgrades and finance them into your VA home loan

A property purchased with a VA home loan is yours to improve. The VA even has a program for financing "green" home improvements right into your VA loan. Qualify for up to $6,000, even more in some cases, to make your home more energy efficient.

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