VA Home Loans: A Great Benefit for Veterans and Their Families

If you are a Veteran, a service member, or an eligible surviving spouse, you may be able to take advantage of a VA home loan to buy, build, improve, or refinance a home. VA home loans are backed by the Department of Veterans Affairs (VA), which means that you can get more favorable terms than with a conventional loan from a private lender. In this blog post, we will share some of the best tips and tricks for availing of VA Home Loans and how they can help you achieve your homeownership goals.

What are the benefits of VA Home Loans?

VA Home Loans offer many benefits that make them attractive for Veterans and their families. Some of the main benefits are:

No down payment required: Unlike most conventional loans, VA Home Loans do not require a down payment as long as the loan amount does not exceed the appraised value of the property1. This can save you thousands of dollars upfront and make homeownership more affordable and accessible.

Competitively low interest rates: VA Home Loans typically have lower interest rates than conventional loans, which can save you money over the life of the loan. The VA does not set the interest rates, but rather guarantees a portion of the loan, which reduces the risk for lenders and allows them to offer more favorable terms2.

Limited closing costs: The VA limits the amount of closing costs that lenders can charge to VA Home Loan borrowers, which can reduce the amount of money you need to pay at closing. Some of the closing costs that are not allowed by the VA include broker fees, commissions, attorney fees, and prepayment penalties3. Additionally, some of the closing costs may be paid by the seller or included in the loan amount, depending on the agreement between the parties.

No need for Private Mortgage Insurance (PMI): PMI is an insurance that protects the lender in case the borrower defaults on the loan. Most conventional loans require PMI if the borrower makes a down payment of less than 20% of the purchase price. However, VA Home Loans do not require PMI, since the VA guarantees a portion of the loan. This can save you hundreds of dollars per month in insurance premiums and lower your monthly mortgage payment.

The VA home loan is a lifetime benefit: You can use the VA home loan benefit multiple times, as long as you meet the eligibility and credit requirements. You can also have more than one VA loan at a time, as long as you do not exceed the maximum loan amount and entitlement available to you. This means that you can use the VA home loan benefit to buy your first home, upgrade to a bigger home, or refinance your existing home.

How to apply for a VA Home Loan?

To apply for a VA Home Loan, you need to follow these steps:

Get a Certificate of Eligibility (COE): A COE is a document that shows your lender that you qualify for a VA Home Loan based on your service history and duty status. You can get a COE online, by mail, or through your lender.

Find a VA-approved lender: You can choose any lender that participates in the VA Home Loan program, but it is advisable to shop around and compare different lenders to find the best deal for you. You can use the [VA Lender Comparison Tool] to find and compare lenders near you.

Get pre-approved: Getting pre-approved means that the lender has checked your credit, income, and assets and has determined how much you can borrow. Getting pre-approved can help you narrow down your home search and make a stronger offer to the seller.

Find a home and make an offer: Once you have found a home that meets your needs and budget, you can make an offer to the seller. You may want to include a VA option clause in your offer, which allows you to cancel the contract without penalty if the VA appraisal comes in lower than the purchase price or if you are unable to obtain VA financing.

Get a VA appraisal: A VA appraisal is an evaluation of the property’s condition and value by a VA-approved appraiser. The VA appraisal ensures that the home meets the VA’s minimum property requirements and that the loan amount does not exceed the fair market value of the property.

Close the loan: After the appraisal is completed and the loan is approved, you can close the loan and finalize the purchase. At closing, you will sign the loan documents, pay any closing costs, and receive the keys to your new home.

What are some tips and tricks for availing of VA Home Loans?

Here are some tips and tricks that can help you make the most of your VA Home Loan benefit and avoid common pitfalls:

Check your credit report and score: Your credit report and score are important factors that affect your eligibility and interest rate for a VA Home Loan. You can get a free copy of your credit report from each of the three major credit bureaus once a year at [www.annualcreditreport.com].?

You can also check your credit score for free at [www.creditkarma.com] or other similar websites. If you find any errors or negative items on your credit report, you should dispute them and try to improve your credit score before applying for a VA Home Loan.

Save money for closing costs and other expenses: Even though VA Home Loans do not require a down payment, you may still need to pay some closing costs and other expenses, such as appraisal fees, title fees, inspection fees, and escrow deposits. You should save enough money to cover these costs and have some reserves for emergencies and maintenance.?

You can also ask the seller to pay some or all of your closing costs, or include them in the loan amount, but this may affect the interest rate and the loan-to-value ratio of the loan.

Shop around for the best loan terms: Different lenders may offer different interest rates, fees, and loan options for VA Home Loans. You should compare different lenders and loan offers to find the best deal for you. You can use the [VA Lender Comparison Tool] or other online tools to compare different lenders and loan offers. You can also negotiate with the lender to lower the interest rate or waive some fees, if possible.

Choose the right loan type and repayment plan:?

VA Home Loans offer different loan types and repayment plans to suit your needs and preferences. You can choose between a fixed-rate loan or an adjustable-rate loan, depending on whether you want a stable or a flexible interest rate. You can also choose between a 15-year, 20-year, 25-year, or 30-year loan term, depending on how long you want to pay off the loan. You can also choose between a standard repayment plan, a graduated repayment plan, or an extended repayment plan, depending on how much you can afford to pay each month. You should choose the loan type and repayment plan that best fits your financial situation and goals.

Take advantage of the VA home loan programs and resources: The VA offers various home loan programs and resources to help you with your homeownership journey. Some of the programs and resources include:

VA Interest Rate Reduction Refinance Loan (IRRRL): This is a program that allows you to refinance your existing VA loan to a lower interest rate or a shorter loan term, without requiring a new appraisal, credit check, or income verification. This can help you save money on interest and pay off your loan faster.

VA Cash-Out Refinance Loan: This is a program that allows you to refinance your existing VA or non-VA loan and take out cash from your home equity, up to 100% of the appraised value of the property. You can use the cash for any purpose, such as paying off debt, making home improvements, or covering education or medical expenses.

VA Energy Efficient Mortgage (EEM): This is a program that allows you to add up to $6,000 to your VA loan amount to finance energy-efficient improvements to your home, such as installing solar panels, insulation, or windows. This can help you lower your utility bills and increase your home value.

VA Native American Direct Loan (NADL): This is a program that provides direct loans to eligible Native American Veterans and their spouses to buy, build, improve, or refinance a home on Federal Trust Land or a Native American community. This program offers low interest rates, no down payment, no PMI, and limited closing costs.

VA Specially Adapted Housing (SAH) Grant: This is a program that provides grants to eligible Veterans and service members with certain service-connected disabilities to help them buy, build, or modify a home to suit their needs. The grant amount can be up to $100,896 in fiscal year 2021.

Conclusion

VA Home Loans are a great benefit for Veterans and their families who want to achieve their homeownership dreams. VA Home Loans offer many advantages over conventional loans, such as no down payment, low interest rates, no PMI, and limited closing costs.

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