Buying a Home With a VA Loan

Buying a Home With a VA Loan
October 8, 2020

Buying a Home with a VA Loan

It feels great to reach that stage in life when you can buy a home. The first step that comes to mind is approaching a bank or mortgage lender to apply for a home loan. If you’re a service member or veteran, you have a great option available that you should strongly consider. There’s a mortgage program specifically for veterans: the VA loan.

How does a VA home loan work? Is it the best option for you? Let’s explore that together in this article before jumping into the real estate market.

What is a VA Loan?

The VA loan or VA mortgage is a program that was initiated by the US government in 1944, enabling veterans to secure $0-down payment mortgage loans to buy, build, or refinance a home. It is crucial to note that the loan is issued by a private lender and partly backed/guaranteed by the Department of Veteran Affairs. This program is available to eligible service members and veterans upon application, and it can save you thousands of dollars.

How Does a VA Mortgage Loan Work?

Unlike conventional mortgage options, VA loans work a bit differently. The loan does not originate from the Department of Veteran Affairs (VA), but the VA guarantees the loan against default. Therefore, private lenders or banks have confidence in offering $0 down payment and better rates and terms to the Veteran or Active Service Member. After a successful application process, you’re free to go with the lender of your choice. Typically, a VA home loan works as follows:

1. Pre-qualification

Approach your VA lender and get the estimates of a home price you can manage to pay for based on your revenue, credit score, entitlements, and other financial factors.

Your lender will need to see your Certificate of Eligibility (COE) to prove that you meet the home loan advantage requirements. Mortgage lenders will often get this for you during the pre-approval process, but you can also independently apply for the certificate on line at eBenefits.va.gov.

2.  Get Pre-approved

This is where the lender verifies your purchasing power and, finally, you get a letter of approval. The verification involves ascertaining that your income and other financial information are true and correct. After per-qualification and in parallel to this ongoing approval process, you can begin looking at homes and find a great real estate agent to guide you. Ready to get pre-qualified?

3. Get a VA-Savvy Real Estate Agent

Many agents don’t understand the caveats of VA mortgages. Therefore, it is vital to deal with a real estate broker who truly knows the program and the inimitable needs of military homebuyers. This will save you time, headaches, and hassles. An experienced and knowledgeable real estate agent will avoid homes that can pose problems during the VA appraisal stage due to their condition. Ready to find a top local agent with VA experience?

4. VA Appraisal and Closing

After getting into a contract to purchase a home, the lender orders a VA appraisal for the property, ensuring that it meets fair market value and VA’s minimum property condition requirements.

Finally, when everything checks out, you will be able to sign legal documents and all the required paperwork for closing, and you get your house keys.

Note that the VA guarantees loans for homebuyers who are buying homes for primary residence only. You are also expected to move into the house as your main home within 60 days of closing. Nevertheless, a spouse can fulfill the latter for you and if you’re single, make sure you speak to your loan officer prior.

What Are the Benefits of Buying a Home Through a VA Loan?

Stuck between a conventional mortgage vs. a VA loan? Well, VA mortgages come with a couple of benefits, and here is why you should consider it over other options:

  1. 1. It’s not mandatory to pay a down payment. If you are cash-strapped, this is the best option you have that doesn’t require any real significant savings to get started.
  2. 2. You can borrow as much as the lender is willing to offer. However, the VA will guarantee up to a certain amount only. As of 2020, this limit is approximately $480,000.
  3. 3. Unlike conventional mortgages where you must pay for Private Mortgage Insurance (PMI) and Mortgage Insurance Premium (MIP), you’re exempted from such for VA mortgages.
  4. 4. Lenders offer better loan terms and interest rates for VA mortgages.
  5. 5. You’re not penalized if you pay your loan early. This means early payment of $100 per month can end up saving you thousands of dollars from loan repayment in the long run.
  6. 6. A VA home loan has limited closing costs. The Department of Veteran Affairs prohibits lenders from charging more than 1% of the loan amount for an origination fee.
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Are you considering buying a home? Worry no more. BrowsingHome. com can help you find a VA Loan and provide experts for every step of the way.