If you’ve served or are currently serving the country as a member of the military, one well-deserved benefit is being eligible for the VA home Loan. This program is designed to simplify the process for first-time buyers (and those wishing to refinance) to help make owning a home a reality. Those who may be eligible include active duty service members, veterans, reservists and National Guard members, and surviving spouses.
VA home loans are similar to any traditional mortgage in that they are provided by banks and lending institutions. However, the difference is the loans are federally-backed, allowing for borrowers to enjoy more lenient qualifications, better rates, and best of all – less jumping through hoops.
If you’re in the market to buy you’re first home and have a military affiliation, take a look at some of the advantages of a VA home loan:
Overcoming the down payment roadblock. For most people, coming up with an initial down payment is the most challenging part of the home buying process, since the target amount could be in the tens of thousands. For instance, at least 3.5 percent down is required for an FHA loan, while 5 percent is needed for a conventional loan. Crunching those numbers can be disheartening, and it could take years to save up. VA loans allow buyers to purchase their homes with no money down at all, while still being able to qualify for favorable interest rates.
A less stressful approval process. Especially since the housing market crash, lenders have been a lot more selective when approving loans to new home buyers, particularly if their credit histories are less than stellar. VA loans offer more leeway to buyers who don’t have the strongest credit standing, even at competitive interest rates. Since VA loans are government-backed, lenders often use their discretion to offer a loan to a military member. Still, a veteran has to have sufficient income and credit to qualify, so it is still key to have your finances in order.
Savings on closing costs. Closing costs can add thousands of dollars onto your out-of-pocket expenses when buying a home. VA Loan recipients get spared some of that expense since the VA puts a limit on lenders’ closing costs. VA home buyers don’t pay an escrow fee – a savings of $500 or more – and the lender can’t charge an origination fee that is more than 1% of the loan amount. Savings add up quickly for the veteran home buyer.
Bye, bye to PMI. Home buyers without a 20 percent down payment (and that’s most people these days) must pay private mortgage insurance, a fee upwards of $200 to $300 or more per month. But VA loan borrowers don’t pay PMI. This means VA home buyers can afford a bigger home for the same money as non-veteran buyers.
Help is available down the line, too. Should you want to refinance for a lower rate sometime in the future, being in the VA program means you can re-qualify through the VA streamline refinance loan. This loan doesn’t require W2s, tax returns, bank statements, or even an appraisal. That can save you some of the frustration and back-and-forth paperwork that goes on with a traditional refinance application.
You can even pass it on. If the day comes when you decide to sell your home, if a potential buyer is VA-eligible, you may be able to simply have them assume your loan. This can be a great selling point for you if you have a good interest rate, and help simplify the entire sale.
Now that you have a sense of the benefits of VA Loans, here’s what you need to know about getting started.
- First, do some research to find a military-friendly real estate agent who is familiar with VA loans. Since the process and the rules are a bit different than that of a traditional loan, you’ll want to work with someone who knows the ins and outs.
- Next, you’ll have to find out which lenders offer VA loans and do some interest rate comparison shopping. Once you have a couple of options, you can get in touch to get pre-qualified, which is a general sense of how much you’ll be able to borrow. Get a free rate quote here.
- At that point, you’ll want to obtain a Certificate of Eligibility (COE). The VA lender requests it for you, and often receives it within minutes. The lender will verify your eligibility, and from there, the VA loan is much like any other home purchase loan.
If you have a military background, looking into the VA Loan program is definitely in your best interest. Beyond all of the benefits listed above, it will help you to start your new life in your new home more quickly.