The Home Buying Process for Veterans

 

What is a VA Home Loan?

A VA Home Loan is a guaranteed loan from a private lender (bank or mortgage company) that can be used to either buy a home (as a primary residence) or to refinance an existing home loan. The Department of Veteran Affairs guarantees a portion of the loan against loss which allows lenders to provide more favorable terms to veterans. 

 

The Benefits of a VA Home Loan

• No down payment (unless required by the lender).

• There is no minimum credit score required. Instead, a lender will review your loan profile prior to approval.

• Mortgage insurance is not required since the VA backs a portion of the loan against loss. This will allow you to save money each month.

• There is no maximum loan amount. Veterans can borrow up to $453,100 without a down payment in a majority of the country. 

• VA home loans are reusable meaning you can use your VA home loan benefit repeatedly as long as you pay off the loan each time. 

• There is no maximum debt ratio. However, your lender will need to provide compensating factors if your total debt ratio is more than 41 percent.

• It can be assumed by qualified individuals. 

• The VA’s residual income guidelines help to confirm that Veteran borrowers can afford the loan. 

• If you become delinquent on your loan, there is assistance available through the VA.

• There is no pre-payment penalty which allows you to make extra payments at any time and reduce your interest amount. 

 

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Who is Eligible for a VA Home Loan?                         

Veterans who meet service length requirements, service members on active duty that have served a minimum period, specific Reservists and National Guard members, and certain surviving spouses of deceased Veterans are eligible for a VA Home Loan. If you're not sure if you qualify, you can determine your eligibility by applying at www.ebenefits.va.gov. 

 

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Steps for Using Your VA Home Loan Benefit to Purchase a New Home 

Determine your Eligibility. Find out if you're eligible for the VA Home Loan benefit based on service and discharge requirements.

Apply for a Certificate of Eligibility. After you have determined your eligibility, you can apply for a Certificate of Eligibility (COE) to prove your entitlement. Lenders can also request the COE on your behalf.  

Select a lender. Compare lenders by using the Consumer Financial Protection Bureau's Owning a Home guide. You can also contact several lenders to determine which will offer the best loan terms for your new home. 

Find the perfect home with the help of a qualified real estate agent. They can help you navigate the home buying process and find a home that suits all of your needs. In order to choose the right real estate agent, you'll want to consider: 

  • How long have they been a real estate agent in your market?
  • What qualities, training, or certifications sets them apart from other agents?  
  • How will they help me to buy a home in a competitive market?
  • What is their commission fee? 
  • How will they communicate with me (Call/text/email)?
  • Do they have any references that I can contact?
  • Do they have experience working with veterans/active duty service members?

By asking these questions, you'll be able to easily identify the best real estate agent for you to work with. 

Sign a purchase agreement. After you find the ideal home for you and your family, your real estate agent can help you to develop an offer, create a sales contract, and assist you with the negotiation process. When your real estate agent agent creates the sales contract he/she should include a contingency which voids the contract if you're unable to obtain VA-guranateed financing. 

Have an appraisal completed. Lenders will require an appraisal from a VA approved appraiser to ensure that the home meets minimum property requirements and determine it's value. Your lender will review the appraisal when it is complete to make sure that it meets their underwriting standards.

If the home you have selected doesn't have sufficient collateral to complete the home loan, there are a few things you can do: 

  • You can choose to request a Reconsideration of Value.
  • Try to renegotiate the sales price with the seller. 
  • If the Reconsideration of Value doesn't yield a higher value and the seller is unwilling to renegotiate the price, you may have the option to pay the difference in cash at closing. 

Close and move into your new home. Closings can occur at a title company, an escrow office, or an attorney’s office depending on the laws in your state. During the closing, you'll sign several documents including the mortgage, the note, and the deed. After closing, it's typically just a few weeks until you can move in and start enjoying your new home! 

Do you have any questions about using your VA home loan benefit to purchase a new home? We can help guide you through the process today! 

 

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