If you currently serve or have served in the United States military, you may be eligible to buy a house with a VA home loan. This can save you a substantial amount of money. But what is a VA home loan and why would you prefer one over a traditional mortgage?
The VA Home Loan
A VA home loan is a mortgage loan that is guaranteed by the U.S. Department of Veterans Affairs. The purpose of this loan is to help currently serving members and veterans of the United States armed forces with the purchase of a home. Although the VA home loan can be beneficial to any veteran thinking about buying a home, it is particularly helpful to veterans that cannot get private financing to purchase a house.
In addition to buying a home, a VA loan can also be used to:
- Repair, alter or improve the primary residence of a veteran.
- Refinance a veteran’s existing home loan.
- Make certain energy efficient improvements to the primary residence of a veteran.
Under the VA loan program, the Department of Veterans Affairs will guarantee a certain percentage of the principal loan amount up to the maximum amount. The maximum amount varies by the location of the property. The percentage covered by the guarantee will depend on the size of the loan and the location of the property. See the VA website for the maximum amount in your county.
Any mortgage lender that participates in the VA home loan program can issue a VA home loan. Before you receive a VA home loan, you will have to prove to the lender that you serve or have served in the U.S. military. Many lenders have processes to help veterans establish their military service eligibility.
Who Is Eligible?
Those eligible for a VA Home loan must obtain a certificate of eligibility to prove that they qualify for the loan. This requires filling out and submitting a form along with proof of military service.
Those eligible for the VA home loan include:
- Veterans who have served before 1975 for at least 90 days on active duty during wartime and were not dishonorably discharged.
- Veterans who have served before 1980 (for enlisted men) or 1981 (for officers) for at least 181 continuous days on active duty during peacetime and were not dishonorably discharged.
- Veterans who served before the Gulf War that completed 24 months of active duty or the full service period (at least 181 days) and were not dishonorably discharged.
- Veterans who served during the Gulf War for 24 months of continuous active duty or the full service period (at least 90 days) and were not dishonorably discharged.
- Those on active military duty who have served for at least 181 days.
- Those who have served at least six years in the selected reserves or National Guard and were not dishonorably discharged.
- Unremarried spouses of a veteran who died in service or from a service connected disability. Unremarried spouses of a serviceperson who is missing in action or a prisoner of war.
- Certain U.S. citizens who have served in the armed forces of a government allied with the United States in World War II.
You may also be eligible for a VA home loan if you served in the armed forces, but were released early for a service related disability, a hardship or an early out. You should contact the Department of Veterans Affairs if this might apply to your situation.
In addition to the service eligibility requirement, those seeking a VA home loan must also have a good credit profile and a sufficient income to qualify for the loan.
The Benefits Of A VA Home Loan
Getting One Is Easier Than Getting A Traditional Mortgage: The guarantee from the Department of Veterans Affairs means that they will make your mortgage payments if you fail to. This guarantee helps mortgage lenders get comfortable with giving you a mortgage loan when they might not have given you one otherwise.
No Down Payment Required: In many cases, the guarantee from the Department of Veterans Affairs will allow you to avoid making a down payment on the house. This means you can purchase a home without having to save a substantial amount of money for a down payment. Keep in mind that you may be able to get larger loan if you are able to make a down payment.
No Mortgage Insurance Required: Traditional mortgages require the borrower to purchase private mortgage insurance if they finance more than 80 percent of the home’s value. However, there is no such requirement for VA home loans. Not having to pay private mortgage insurance will reduce your monthly mortgage payment.
Limited Closing Costs: The Department of Veterans Affairs limits the amount of closing costs that you must pay to obtain your mortgage.
Possible Assistance For Financial Hardship: If you experience financial hardship, the Department of Veterans Affairs may be able to offer you assistance with making your loan payments. The availability of assistance will vary on a case by case basis.
The bottom line is that VA home loans can be an attractive option for many veterans and active military servicepersons. If you have served your country and are thinking about buying a home, you should look into a VA home loan program. It might end up saving you thousands of dollars on your home purchase.