VA loans, or mortgages offered by the Department of Veteran Affairs, are one of the best tools for getting a home. It has some of the easiest mortgage requirements, helping you to get a home with almost no money down.
And while they are primarily meant for obtaining a primary residence, you can usually use them to get a second home as well. And if you know a thing or two can even use them for real estate investing.
There are many resources for veterans out there, but this has to be one of the best. The only question you need to ask yourself is if you qualify for one.
They are intended for service members who have fulfilled their initial obligations and may still work for the military or who have moved on. Keep reading below to see what it takes to qualify, and why these loans are so special in the first place.
Benefits of VA Home Loans
A standard mortgage requires the borrower to put 20% down when buying a home. More flexible programs are available these days helping borrowers put less down, somewhere between 3.5% and 20%.
But when normal borrowers put less than 20% down, they need to also pay private mortgage insurance (PMI), which is an additional monthly payment. And aside from a down payment, standard borrowers need cash upfront to pay for closing costs, which can be a few thousand dollars.
But with a VA loan, you can put 0% down. And when you do, you won’t have to pay any PMI, as your loan is backed by the VA. You’ll get some of the lowest interest rates in the country. And you can usually wrap all or most of your closing costs into the loan so that you hardly need any cash upfront.
And if you sell the home, later on, you can use a VA home loan to obtain a new residence over and over again, though you can only have one outstanding VA loan at a time.
Qualifying for a VA Loan
Not everyone who has and is serving in the military is eligible for a VA loan. Typically, you have to serve for a certain amount of time before you qualify.
You either need to be a war veteran or peacetime service member who has met the minimum time requirements of service. You need to serve for a minimum of 90 continuous days on active duty during wartime or 181 days of active duty during peacetime.
If you are the surviving spouse of a service member who died in the line of service, then you may qualify for a VA loan. And if you have served in the National Guard of the Reserves for six years or longer, you may qualify as well.
If you don’t quite meet the requirements, you might still be eligible, depending on your situation and reason for discharge. Speaking with experienced VA lenders can help you determine eligibility.
The VA doesn’t set a minimum required credit score, but most individual lenders will do so. 620 is a common minimum threshold, though there may be exceptions.
It’s worth it to spend time improving your score before applying for a VA loan, as a higher score will lead to a lower interest rate, which will save you thousands of dollars over the life of your loan.
You will also need to have enough income to cover the mortgage payment and additional expenses. If you have other monthly debt payments, try paying those down first, to lower your debt-to-income ratio (DTI).
Getting Started with a VA Loan
Ready to use one of the best tools for veterans available? With so much financial help, this tool, if used by more veterans, can help prevent veteran homelessness and improve the quality of life for service members after they retire or are discharged.
To get started with a VA loan, you need to get your certificate of eligibility (COE). Most people do this by logging into their eBenefits portal. If you don’t know how to log onto this platform, then working with a VA lender can help you obtain your COE.
This certificate shows mortgage lenders that you meet the requirements for obtaining a VA loan. With this in hand, you can work with a lender of your choosing to get approved for a loan. Not all lenders offer VA loans, and some are more experienced than others at helping veterans.
With a mortgage pre-approval letter in hand, you can work with a real estate agent to find a home. When buying a home, you’ll need to get a special VA appraisal to ensure the house meets VA loan standards.
Resources for Veterans: Using a VA Loan
VA home loans are primarily used for a primary residence. However, there are instances when a VA loan second home makes sense. If you already have a VA loan on your home but are required to move to a new station, you may be able to get another VA loan on a second property, while renting out the first.
There are strict requirements to follow when making this happen, but if you do it right, it can end up being a great investment opportunity.
Also, if investing is your goal, then you can use a VA to house hack. Since VA loans require you to buy a primary residence, you need to plan on living in the property. But you can buy a multiunit property, between two and four units, and live in one while renting out the others.
This can help you cover the mortgage payment on the home, or even make a profit each month while living in your home.
Doing this can help you build a financial foundation so that you can start growing your net worth, even while serving in the military.
Don’t Waste Your Benefits
The VA loan is one of the best resources for veterans available. To be able to buy a home, with almost no money upfront can help many, many people get into a house and live comfortably.
If you are a current service member or veteran, be sure to take advantage of this program. And if you aren’t maybe worth serving your country for a period of time in order to earn these benefits.
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