There are many great home financing advantages to being a military veteran or active military. One of the biggest pluses that you can enjoy is getting a VA loan with competitive interest rates, low closing costs and no down-payment required.
A VA loan is guaranteed by the Veterans Affairs Administration. This means that if you were to not pay the mortgage, the VA will pay back your lender. This guarantee means a great deal. It makes many more mortgage lenders likely to give loans to veterans with moderate income and average or even poor credit.
The benefits do not stop there, however. You also have the possibility of getting a VA home loan with 100% finance programs. Only VA and USDA loans offer zero-down home loan programs. That’s right. You may not even need to put money down to get your mortgage. For many vets, it means they only have to worry about paying closing costs of 3% or 4% of the loan amount.
If you are a vet and are thinking of getting a VA loan, we want to provide you with this helpful guide to make the process easier:
- Regular active duty military can apply for a VA loan after six months of service or 90 days for the Gulf War. Retired vets have to have completed 181 days or service and received an honorable discharge. Surviving spouses can be eligible for the benefit too if they remarry after the age of 57.
- You do not need your Certificate of Eligibility to start. Lenders will get this critical document once you have applied for your VA loan.
- Think about your credit score. While many military mortgage lenders will be very flexible with VA loans, you will have an easier time qualifying if your credit score is at least 620, and a 680 or better makes things very easy.
- Cut down your debt to income ratio to 41%. If you have less debt, you will have a much easier time qualifying for a loan. You should try to pay down your credit cards as much as you can which will raise your score a good deal, as much as 40 points. Also, you should not have any late payments on any bills for at least a year.
- Get together all of the paperwork you will need. You should have your bank statements, two years of tax returns, a month’s worth of pay stubs, and a profit loss statement if you work for yourself.
- Get a pre-approval. This will come from a VA-approved lender who will pull your credit and verify your employment and income information. That way, when you go shopping for houses, you can show that you have been pre-approved. This will make it much easier to put in a bid on a house and have it seriously considered.
- Find agents who know VA loans. It is helpful to work with a real estate agent who is familiar with the VA loan process. He or she can help you to steer clear of houses that are going to get hung up in the military loan approval process. They also can use their knowledge in some cases to reduce your closing costs.
- Be ready for upfront costs. Even if you get 100% financing, you will need to pay for an appraisal and put down an earnest money deposit ($1,000 is very common). Also, while the seller can pay part of your closing costs, you should be ready to pay all of them yourself.
- You can use your VA loan benefit multiple times. In most cases, you can only have one VA home loan at a time, though there are exceptions.
- If you lost a VA loan in a foreclosure, this will not prevent you from getting another VA mortgage.
Something to Chew On
Anyone who has military experience and can qualify for a VA mortgage should strongly consider doing so. The VA loan is one of the few mortgage loans you can get today that features 100% financing. There used to be many programs available for 100% VA financing, but most of those were gone with the Great Recession.
As a veteran, you still can get a home with no money down. That said, you still need to make sure that you have the income to afford paying the loan each month.
Also, you should try to get your credit score up as much as you can before you do a VA mortgage application.
Lastly, even though VA loans are largely the same, the interest rates can vary from lender to lender. It will always benefit you in the end to do your shopping and homework. You could get the very same loan product with different lenders and have two different interest rates.
Your VA home loan benefit is one of the biggest advantages of your military service, and you should take advantage of it as often as you can.