You bravely served your nation and now you’re considering buying a home with a VA loan. Go for it, you’ve earned it!
But before we get started – I want to thank you for your service!
If this is your first time purchasing a home using a VA loan you probably have some questions. That is perfectly fine. We will help you determine if a VA loan is the right choice for you.
What is a VA Loan?
While it may seem like the Veterans Administration is going to cut you a check to purchase a home, that’s just not the case.
A VA loan is just a loan guaranteed by the VA. It’s an option for veterans that have served in the United States military to purchase a home with zero money down without a PMI.
Sound too good to be true? You bet it is! While this mortgage option is chalked full of benefits, there are a few disadvantages as well.
Advantages of Buying a Home with a VA Loan
First off, and probably the most notable advantage of a VA loan is the fact that it is zero money down.
Your down payment = $0.00
These days, that’s probably one of the best benefits to a VA loan. Who has $50,000 laying around to drop a down payment? Unfortunately, not very many.
You may still be on the hook for other costs such as earnest money and option money (hello, Texas!), but a down payment won’t be one of them (if you choose).
With most other loans you can expect to pay what is known as PMI, or private mortgage insurance. When you purchase a home using a conventional loan and do not put a minimum of 20% down, you’ll pay a monthly PMI. A PMI is typically 1-2% of the loan amount – per year – paid monthly. So on a $300,000 home you can expect to pay around $250/month for PMI. Not the case with the VA loan.
VA loans also enjoy better rates than most conventional loans. As of writing this, lenders are advertising 2.625% on a conventional 30-year fixed rate mortgage and 2.25% on the same terms but VA backed. That means more money stays in your pocket.
Disadvantages of Buying a Home with a VA Loan
Not surprisingly, there are several disadvantages to using a VA loan.
For starters, VA loans can only be used on your primary residence. This doesn’t mean you can’t move out when you PCS, it simply means you have to buy it with the intent to live in it. Sorry, can’t buy that dream vacation home with a VA loan.
There are also funding fees associated with VA loans. These rates vary based on your circumstances, however. For example, your first-time use of a VA loan with less than a 5% down payment is going to cost you 2.3% of the home price. Whereas, the second time you use it you can expect to pay 3.6% in fees if putting zero down.
Don’t lose sleep over the funding fees, though. You’re able to roll them directly into your mortgage so you’re still not pulling cash out of your account. You can skip VA funding fees altogether if you’re a disabled veteran receiving compensation from the VA or meet a myriad of other criteria.
What if you’ve already used a VA loan? You’re in luck! You can use a VA loan multiple times.
Am I Eligible for a VA Loan?
If you’re still reading up to this point you’ve probably determined that a VA loan is right for you. Great! Now let’s see if you’re eligible.
In general, if you served in the United States Armed Forces on active duty for greater than 90 days you probably qualify to use a VA loan. This isn’t always the case, but you get the idea.
To see if you qualify for buying a home with a VA loan, you’ll need to apply for a Certificate of Eligibility (COE) through the Veterans Administration. You’ll provide this COE to your lender to prove that you qualify for a VA loan.
Lenders Offering VA Loans
Not all lenders offer VA loans, but from my experience in the local area most do. Regardless, you’ll want to find a VA lender that specializes – or at the very least – does plenty of business with veterans.
Here in the Fort Hood area you’ll be hard-pressed to find a lender that does not offer VA loans. However, I’m sure they exist. I simply have not worked with a lender that does not.
A good VA lender will also know if the state you’re buying a home in has programs for veterans or first-time home buyers.
Choose the Perfect Real Estate Agent
While there are no formal requirements for your real estate agent if you’re using a VA loan, you might consider a buying a home with a VA loan using veteran-experienced agent.
Having an agent that is well versed with the PCS process and understands the requirements for VA loans will go a long way during your journey to home ownership. If you’re on active duty, an agent familiar with the military will know the ins and outs of the local military installation.
If you have some any questions regarding VA or even conventional loans I would love to help. I can walk you through the process and recommend some great lenders.
Give me a call or send me a message if you’d like more information.