When American military veterans returned from fighting in World War II, the government decided to reward their service by helping them to buy a home. Ever since, the Department of Veterans Affairs has guaranteed private mortgages, giving veterans some major homebuying advantages that civilians don’t have. Active duty members and even surviving spouses can also use these benefits. What follows is a guide to understanding and using the VA’s home loan programs to buy your dream home.
No Money Down
Most people have to save for a down payment of at least 5 percent before they can think about applying for a mortgage. Not veterans! With the power of the government backing a mortgage, lenders see veterans as low-risk. That’s why they waive the down payment entirely for VA loans. You could apply for a mortgage that covers 100 percent of the purchase price.
No Insurance Required
When civilians buy a home with less than 20 percent down, they’re usually required to pay monthly private mortgage insurance (PMI) to cover their risk of default. But VA loans don’t require any PMI. Over the life of the loan, that could mean a savings of thousands of dollars for homebuyers. It’s another discount available only to military homebuyers.
First-Rate Rates
Your lender considers several factors when deciding on your interest rate, including credit score and the amount borrowed. While these still matter, VA loans generally feature interest rates up to 1 percent lower than similar conventional loans. So even if you have a less-than-stellar credit score, you’ll still get a competitive interest rate.
Benefits Galore
On top of these major advantages, you can also find a range of smaller ones:
- A limit on the fees and closing costs you pay
- No penalty for paying off the mortgage early
- The ability to get a VA loan any time you buy a home (not just the first time)
- Help for veterans who are struggling to make their monthly payment and are at risk of foreclosure
Navigating The Process
Now that you know all the benefits of VA loans, let’s walk through the steps to securing your mortgage:
- First, apply to the VA for a Certificate of Eligibility. It tells your private lender that you qualify for a VA loan, based on your history of service. Veterans will need to provide their discharge or separation papers, while active duty members will need a statement of service.
- Next, choose your mortgage lender. Getting pre-approved will make it much easier for you to shop for a home, since it will let sellers know you’re serious. You’ll submit financial information, including your credit score, income and debt. Based on that information, the lender will calculate how much they’re willing to loan you and at what interest rate.
- Find a real estate agent you trust — ideally one who has experience with veterans and VA loans. Use your pre-approval letter to shop for a home in your price range. Once you find a home you like, make a competitive offer.
- If the sellers accept your offer on a home, the VA will send an independent appraiser to verify the value and note any required repairs to meet minimum standards. As soon as that’s resolved, you’ll sign a lot of closing documents and take ownership of your new home!
Buying a home can feel like a long road, but remember that you’re not the first one who’s walked it. The VA has backed more than 25 million loans over the years, helping those who serve to feel at home when they return home. There are experts willing to assist you all along the way, from federal officials to local lenders and realtors.
At Equity Bank, we’re proud to do our part for the people who defend our freedoms. We’ve been working with military veterans and active duty service members for years to make their homebuying dreams a reality. If you’re just starting the process, get in touch with us today!