- April 28, 2017
- Posted by: steve
- Categories: mortgage articles, va mortgage
Are you a veteran curious about getting a mortgage? There are advantages on your side. Learn what you need to know about loans for veterans in this post.
Homeownership is an American dream for most veterans.
It’s an exciting milestone. It’s also most likely the biggest financial commitment you’ll ever make.
But if you’re a veteran, there’s great news. If eligible, you can apply for a VA loan, which is a home-mortgage option that is guaranteed by the US Department of Veterans Affairs (VA).
We’ve broken the process down into eight easy steps that will have you well on your way to obtaining your loan for veterans – and owning the home of your dreams.
Advantages of loans for veterans
First, let’s go over some of the many benefits of a VA loan.
No money down
Unlike traditional loans that require you to make a down payment, you don’t have to put any money down with a VA loan. So you can finance 100% of the home’s value.
Competitive interest rates
VA loans offer rates that are lower than most conventional fixed loans.
Lower credit score requirements
Buyers with less-than-perfect credit can still qualify for a VA loan with a great interest rate.
Private mortgage insurance – or PMI – protects the lender if you stop making payments on your loan. But there’s no PMI on VA loans, saving you around $100 a month.
Limited closing costs
Closing costs cover things like appraisal, title fees, property taxes and homeowners insurance. The VA strictly limits the amount a veteran can be charged.
No prepayment penalty
You can pay your loan off early without incurring any sort of penalty fee.
With so many benefits, it’s no wonder loans for veterans have reached an all-time high. Last year, the VA guaranteed a total of 707,107 home loans, the most in the history of the program. And that number is expected to keep on rising.
Keep reading to find out how to start the process.
Step 1: Find out if you qualify for a VA loan
All this talk about loans for veterans is exciting, but first, you need to find out if you qualify.
Loans for veterans are for active and retired service members who meet at least one of the following requirements:
- Served 90 consecutive days of active service during wartime
- Served at least 181 days of active service during peacetime
- Have more than 6 years of service in the National Guard or Reserves
- Is the spouse of a service member who has died in the line of duty or as a result of a service-related disability
If you meet at least one of these requirements, read on.
Step 2: Determine what you can afford
You’re going to be paying your home off for years – most likely even decades – so spending too much on your new home could affect you for a very long time.
You don’t want to become “house poor”, meaning you spend a significant amount of your income on your mortgage and other related costs such as homeowners insurance and HOA fees, leaving little money for other expenses.
Though you may be approved for a mortgage that’s more than you’re willing or able to spend, most lenders suggest that you spend no more than 28% of your monthly income on your mortgage.
Use a mortgage calculator to determine a monthly payment that you feel comfortable with.
Step 3: Pull your credit report
There’s a lot that goes into getting a mortgage and finding a home, so you should consider pulling your credit report as soon as possible from one or all of the three credit bureaus – Experian, TransUnion or Equifax.
Your credit score affects how lenders view your credit worthiness and can influence your loan terms. So take some time to review your credit report(s) for accuracy.
If you see a collection or late payment that you know is a mistake, you can try contacting the creditor directly to fix the error or pay an established credit repair company to clean up your report for you. You should also report any errors to each credit bureau online.
Although you can still qualify for a loan for veterans with less-than-perfect credit, it’s still beneficial to be aware of your score before applying for a loan.
Step 4: Find a lender
You’ve figured out what you’re comfortable spending, and you now have a better understanding of your credit score. Now it’s time to find a lender.
Do your research
Lenders offer different rates and closing costs, so to get the best deal, you’ll want to do your research and compare several lenders.
But keep in mind that the rate quote you see on their website is only a starting point – the lender will have to see your credit information and process a loan application to determine your actual rate.
Make sure they’re VA-approved
It’s important to make sure that any lender you’re considering is a VA-approved financial institution.
Although most banks can offer loans for veterans, lenders that are approved by the VA will better understand the complexities of the VA loan program and can move your application through the process much more quickly and easily.
Once you’ve narrowed your decision down, ask your finalists lots of questions.
How do they prefer to communicate (email, phone, etc.), and how long does it take the to respond? Are they available to answer questions after hours? How long are their turnaround times for things like appraisals and closing?
Step 5: Determine what type of home you would like
You may already have a dream home in mind. Maybe it’s a small condo on the beach or a 4-bedroom colonial in the suburbs.
However, only certain homes are eligible for a loan for veterans. Here are some examples:
You can use your VA loan to purchase an existing single-family home, townhouse or condominium in a complex that’s been approved by the VA.
You may buy a multi-unit property (with up to four units) as long as you will occupy one of the units as your primary residence.
Building a home
You can use your VA loan to build a home, but it’s a little tricky.
First, you’ll need to get a VA construction loan rather than a mortgage loan – but construction loans typically do not offer the same benefits as a mortgage loan because the lender is taking on more risk. You’ll likely need to provide a down payment or agree to additional terms.
On top of that, you must obtain VA approval for all of your builder’s, plans, and sites.
So while using your VA loan to build a home might not be ideal for some, there are ways to get it done if that’s what you choose.
Unlike other types of houses, mobile homes depreciate in value, so they’re worth less over time rather than more. Because of this, it can be difficult to find a VA-approved lender willing to approve a loan for a manufactured home.
If you’re able to find a lender to approve the loan, the mobile home must meet certain criteria, such as it must be permanently affixed to a foundation, and it must have permanent sleeping and cooking areas.
Step 6: Find a real estate agent
A crucial step to buying a home is to find the right person to guide you through the process. Whether or not your real estate agent is a good fit can be a huge factor in the success of your home-buying process.
Ask for referrals
Word-of-mouth is a great way to find an agent you can trust. Ask friends, family members, and coworkers who they used to buy their house, and what they liked and didn’t like about their agent.
Have a chat
Once you’ve narrowed down your search, contact the agents you’re considering and have a conversation with each one. Ask lots of questions. Get a sense of their personality. Are they a good listener? A good communicator? Do they respect your opinion? Do you have chemistry with them?
They can be the most experienced real estate agent in the world, but if you’re not compatible with them, it just won’t work.
Pick someone you trust
Remember – you’re going to be spending significant time with this person, and they’re going to learn a lot of personal information about you while helping you make one of the biggest financial decisions of your life.
That’s why picking the right agent – someone you trust and feel completely comfortable with – is critical to your home-buying process.
Step 7: Search for your home
Now the fun part begins. You get to go house-hunting!
Depending on the market and what you’re looking for, you could find your new home during your first outing, or after months and months of searching.
Before you schedule a showing, preview homes online using sites like Realtor.com. You may not be able to determine from a website if you want to buy the house, but you should be able to eliminate ones that definitely don’t meet your criteria.
After you’ve seen a few homes in person, they’ll all start blending together. Take photos and notes during your visits so you don’t have to rely on your memory later.
Don’t be shy about asking to visit properties more than once. Your emotions can take over the first time you see a home, and you might miss things that you would have noticed if you hadn’t been so excited about, say, the charming claw-foot tub.
Be patient. It might take you a while to find the perfect home, but if you take your time and don’t settle, you’ll eventually find the house of your dreams.
Step 8: Get a VA appraisal
Once you find that perfect home, you’ll need to get an appraisal through the Veterans Administration to finalize the loan. The VA-approved appraiser will check the house to ensure it’s safe, structurally sound and sanitary.
The appraisal is NOT the same as a home inspection – we highly recommend getting one of those as well, but it’s not a VA loan requirement.
Your lender will handle the appraisal and let you know once the appraisal report is complete.
Time to move
A beautiful new home is in your future! Just follow these steps to help break down the process for obtaining a loan for veterans.
Contact us anytime for more information.