Buying a home is often the biggest purchase people make in their lifetime, and because of stringent down payment and credit score requirements, homeownership can seem unattainable for many. However, for those who have served in the U.S. military, it’s possible to purchase a home with little to no money down using a VA loan.
How Purchasing a Home with a VA Loan Can Improve Your Savings
Buying a home with a VA Loan means that you will have little to no down payment and are exempt from private mortgage insurance (PMI) fees - and the accumulated savings from both perks add up to thousands of dollars over the life of the loan. These savings can be invested into your retirement accounts so you are set up for a successful financial future - and we’ll show you how.
What Is a VA Loan?
VA loans are private mortgage loans backed by the U.S. Department of Veterans Affairs, exclusively for current and former military personnel and their families. This type of loan can help veterans or their surviving spouses purchase, build or refinance an existing home as long as they meet the minimum requirements.
VA loans can be used to purchase or refinance any primary residence (a home you will live in permanently) including single family homes, condominiums, townhomes, and manufactured homes. This loan type cannot be used for a secondary residence (a home you will not live in permanently), such as vacation or investment properties.
Benefits of a VA Loan
Veterans, reservists and active-duty military members and their families that choose to purchase, build, or refinance a home with a VA loan experience perks such as:
- Little to no down payment
- No private mortgage insurance (a product and fee incurred for people putting less than 20% down on a home)
- No prepayment penalties
- Low credit score qualification (score requirement varies depending on the lender)
- Exemption from funding fees (disabled veterans only)
VA Loan Requirements
According to the U.S. Department of Veterans Affairs, you need a Certificate of Eligibility (COE) to apply for a VA direct or VA-backed loan, which is determined based on your service history and duty status. Aside from meeting your lender’s credit and income requirements, you must also meet the minimum active-duty service requirements, unless you:
- Were discharged for reasons related to your service
- Faced a hardship
- Were diagnosed with a medical condition
To learn about eligibility requirements for a VA or VA-backed loan, visit the U.S. Department of Veterans Affairs.
Obtaining a VA loan as the surviving spouse of a veteran is slightly more challenging, but not impossible. The U.S. Department of Veterans Affairs has a list of qualifications, including the status of your spouse (missing-in-action, deceased or prisoner of war) and COE approval.
If you’re ready to purchase a home and believe that a VA loan is right for you, you’ll need to follow the following steps:
- Choose a few VA-approved lenders such as Quicken Loans or Navy Federal Credit Union to get started. NerdWallet has a list of the 9 best VA mortgage lenders to consider in 2021, which can be viewed here.
- Contact your chosen lender for COE assistance. Their mortgage team can help verify your eligibility and proof of military service and status.
- Get pre-approved by your lender. The approval letter will state your approved loan amount and help you determine how much you can afford.
- Let the house hunt begin! If you’re shopping with a VA loan, the search process looks the same as it would with any other loan type, such as an FHA or conventional loan, where the property must meet specific requirements for the lender, which is determined through inspections and appraisals.
- If the home you want to buy meets the lender’s minimum property, then you are ready to make a purchase offer.
- Once a seller accepts your offer, the lender with coordinate an appraisal with a VA-approved appraiser to ensure the home meets basic property condition requirements, along with a valuation on the house. This is an important step in the lenders underwriting process for final approval.
VA loans are only a small token of appreciation for current and former military members, but the financial benefits are long-lasting. If you are ready to purchase a place you can call your forever home, then taking advantage of a VA loan may be the right decision for you.
As part of Military Appreciation Month, Slavic401k wants to thank those that have served your dedication and service.