First time military homebuyers interested in learning more about their VA loan benefit are often caught in a deluge of real estate terms, complicated math equations, and a long list of other buying insecurities. There’s a lot to learn before becoming a homeowner!
Sometimes, integral facts get buried when researching VA loans because the information can be dense and overwhelming, so it's helpful to learn a few key points to help you make sense of the process. Familiarize yourself with these VA home loan facts!
VA Loan Basics
The U.S. Department of Veterans Affairs does not supply the money for home loans.
The VA only guarantees a portion of the loan. With this backing, mortgage lenders often feel more confident about a service member’s application and are more likely to extend the option to finance a home.
VA loans are typically intended to put military members in single family homes, condos, or modular housing. Minimal issues ensure a move-in-ready residence. Loans for fixer-uppers are not generally offered.
Types of Properties Eligible for VA Loans
The VA approves loans for primary residences and does not back loans for vacation or investment property. The house must be a primary residence first, before converting it to a rental property.
VA borrowers cannot use their entitlement to secure property outside of the U.S., use the VA loan for business purposes, or buy farmland without a primary residence for the veteran on site.
Benefits of VA Loans for Military Members
VA loans can be used more than once, even for refinancing to take advantage of low VA loan interest rates. If you have remaining entitlement available or if the initial loan has been paid back, the loan can be used again for future purchases. Contacting the VA directly is the best way to review your Certificate of Eligibility (COE).
Have a VA Loan? Take a Second! details the process for using your VA loan more than once.
Some service members who've faced foreclosure or bankruptcy can be eligible for a VA loan, but they must go through a two-year waiting period, show financial readiness, request an updated COE, and then apply for a new VA loan.
Military members who encounter financial problems within the duration of their VA loan are authorized to receive support from the VA office. There, the staff is dedicated to finding options to make the payments manageable and foreclosure preventable.
Special Considerations: VA Loans and Service-Related Disabilities
VA funding fees may be avoided if the military member has a service-related disability. The COE will disclose this information.
According to the VA, the funding fee is waived if:
- You’re receiving VA compensation for a service-connected disability, or
- You’re eligible to receive VA compensation for a service-connected disability, but you’re receiving retirement or active-duty pay instead, or
- You’re receiving Dependency and Indemnity Compensation (DIC) as the surviving spouse of a Veteran, or
- You’re a service member who has received a proposed or memorandum rating before the loan closing date that says you’re eligible to get compensation because of a pre-discharge claim, or
- You’re a service member on active duty who, before or on the loan closing date, provides evidence of having received the Purple Heart.
Your Step-by-Step Guide to Using the VA Home Loan describes the entire application process.
Costs Beyond the VA Loan
Although a VA loan doesn't require a down payment, borrowers should know this doesn’t mean cash isn’t needed for the transaction. Experts recommend having 5 to 10% of the home’s purchase price on hand to cover closing costs and earnest money. This amount of cash could also pay the VA funding fee instead of rolling it into the loan.
The VA loan is a significant benefit for the military, but it doesn’t come without its own details and requirements. Using qualified real estate agents and reputable lenders can make the process easier than navigating home buying for the first time alone.
Review MilitaryByOwner's directory of real estate professionals before your next military move. Many have military experience or are military spouses who understand the nuances of buying a home within the framework of a military lifestyle.
