• Home Buying

You’ve Earned It: Benefits of VA Home Loans for America’s Veterans

The VA itself doesn’t loan money for veterans to buy homes; instead, it guarantees the loan. That means lenders working with veterans who qualify for VA-backed loans take on less risk, leading to lower interest rates and other more favorable terms. Veterans can use a VA home loan to purchase an existing home, whether it’s a freestanding structure or a unit in a condo complex. The loans can also be used to fund new home construction, refinance a home mortgage or invest in a rental property with up to four units if the veteran plans to live in one of the units.

Learn more about the benefits, whether you might qualify and how to launch the buying process as a qualifying veteran.

The Benefits of VA Home Loans

The goal of the VA home loans program is to help active and retired service members and veterans access affordable housing and homeownership. If you meet qualifications, some benefits you can expect to receive are summarized below.

• Access to several types of loans. The VA backs or partially backs a variety of loans. Qualifying veterans can receive purchase loans with competitive interest rates to buy existing residential properties or build a new home. Other loan options include Interest Rate Reduction Refinance Loans to help vets seek more favorable financing for their homes, adapted housing grants to assist vets in modifying homes to meet disability needs and state-based programs that can assist with costs such as property taxes.
• No down payment. In most cases, eligible veterans don’t have to cover a down payment to obtain a VA-backed home loan. This is one of the best benefits, as most other forms of financing — even for first-time home buyers — require down payments. Under the VA programs, vets don’t have to scramble to save the money or find a different assistance option for down payments.
• No PMI or mortgage insurance premiums. VA home loans don’t come with requirements for mortgage insurance, even though the buyers don’t have to make a down payment. To get out of PMI or mortgage insurance requirements with conventional loans, you sometimes have to put 20 percent or more down.
• More favorable terms. On average, VA-backed loans tend to come with lower interest rates than their conventional counterparts. That can save veterans a lot of money.
• Foreclosure avoidance advocacy. Since the VA backs the loans through its programs, it’s in the administration’s best interest for veterans to succeed in paying their mortgages long-term. The VA provides advocacy experts who work with veterans when foreclosure may be a threat, helping the homeowners find alternatives such as short selling, refinancing, or mortgage modifications.

Other benefits that may come with a VA-backed mortgage include a lack of prepayment penalties if you pay the loan off early, refinance options that help you manage your mortgage as personal finances evolve, limitations on how much you’ll pay in closing costs as a buyer, and second-tier entitlement that may let you access a future VA home loan even if you’ve used the benefit before.

Who Qualifies for VA Home Loans?

Backing from the VA doesn’t mean banks turn a blind eye to other qualifying components of a home loan. Veterans and active military personnel seeking VA home loans must demonstrate satisfactory credit histories and have the income and debt ratio appropriate for the monthly payment involved.

You’ll also need proof that you meet VA requirements for the benefit. That means you’re a veteran who was discharged with any status other than dishonorable or that you meet one of the following other statuses:

• An active duty service member
• Current or discharged Reserve or National Guard member who has never been an active Federal service member (discharge must be other than dishonorable)
• A surviving spouse of a veteran or formerly active service member who meets the above requirements

You also must have served a certain number of days in total, typically at least 90 days during wartime or at least 181 days during peacetime.

How to Take Advantage of VA Home Loan Benefits

To apply for a VA home loan with a participating vendor, you have to meet the vendor’s eligibility requirements and present a Certificate of Eligibility for the VA-backed program. The evidence required for the Certificate of Eligibility depends on your service history, and you can find the exact requirements and online application through the VA website.

Lenders who are experienced with helping veterans obtain VA-backed loans may also be able to help you apply for the Certificate of Eligibility, potentially expediting the process. In fact, many lenders who provide VA loans have access to an online system that can establish your eligibility as a veteran and generate a digital Certificate of Eligibility in seconds. If you’ve already found a lender you want to work with that has this capability, it can save you a lot of time.

VA-Backed Loans: The Fine Print

The VA-backed loans do come with some fine print. Most veterans using the program have to pay a funding fee. That fee is much less than any down payment you might pay, and you can pay it in cash or negotiate to have it financed as part of the loan.

The VA doesn’t limit the amount of money you can borrow to purchase a home — that’s usually a number set by the lender based on your credit history, ability to make payments and the value of the property in question. However, the VA does limit its own liability, so it will only partially guarantee loans above a certain amount. Veterans financing above those limits may need to work with their lender to ensure the loan is viable.

Even with these limitations, VA home loans can be a big benefit to active and former service members who want to put down roots via homeownership. If you think you qualify for these loans, let us know, and we’ll help you understand your options for buying a new home or refinancing an existing one.