As a service member or veteran, you might be able to get a special home loan through the U.S. Department of Veterans Affairs. Private lenders like banks and mortgage companies fund these loans, a portion of which are guaranteed by the VA, and make them available to current and former members of the military as well as eligible surviving spouses.
Because the VA guarantees a portion of these loans, you can potentially get more favorable loan terms from a lender. First, find out what the advantages of a VA loan are, then follow these steps to boost your loan approval chances and make buying a home more affordable.
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When to Apply for a VA Loan
VA home loan lenders typically provide buyers with very favorable terms, making it possible for them to realize the American dream of homeownership. The VA offers a number of different programs for homebuyers, including the Native American Direct Loan program, which helps Native Americans finance homes, and the Specially Adapted Housing Grant, which helps veterans with service-associated disabilities live independently in an appropriate environment.
Some VA home loan advantages include:
- No down payment for qualified borrowers
- Private mortgage insurance is often not required
- Limits on how much you pay for closing costs
- Lower VA loan rates
Additionally, private mortgage insurance is often not required, and it might be easier to qualify for a low rate on a VA loan, even if your credit report isn’t in good shape.
Steps to Get Your VA Loan Approved
Learn everything you can about VA loan requirements and VA home loan eligibility before you start your search for a mortgage lender and a home. Follow these steps to improve your chances of getting a VA mortgage:
1. Make Sure You’re Eligible
You or your spouse must meet minimum service and discharge requirements to get a VA mortgage. You might be eligible if you’re a veteran, active-duty service member, current or former National Guard or Selected Reserve member, or surviving spouse. Verify that you qualify for a VA home loan by getting a certificate of eligibility. You can apply for one online through the VA website, through your lender or by mail.
2. Check VA Home Loan Rates
The VA does not actually set interest rates, but rather, VA home loan lenders set rates according to the current state of your finances. Your VA home loan rate can be determined in part by your:
- Credit score
- Debt-to-income ratio
- Loan length
Your home loan interest rate is not to be confused with the annual percentage rate on a VA loan, which considers the interest rate, origination fees, and other fees you’re required to pay as a result of securing the loan.
3. Understand Loan Limits and Requirements
Although the VA doesn’t limit the amount you can borrow to finance your home, it does limit how much liability it can assume, which might restrict the amount your lender is willing to approve.
The VA loan limit varies by county because real estate values differ among locations. Find your loan limits on the Federal Housing Finance Agency’s website.
4. Meet Occupancy Requirements
Because VA home loans are designed to help eligible borrowers purchase primary residences, the loans come with residency requirements. Typically, borrowers must take occupancy of a home within 60 days of completing the loan process.
Make sure you understand the occupancy requirements because there might be exceptions to this VA home loan requirement. Checking on this matter is particularly important if you — or your qualifying spouse — are an active service member expecting to deploy in the near future.
5. Know Your Closing Cost Limits
Make sure your closing costs are acceptable to the VA because it limits what buyers can pay in these costs. The closing costs can include expenses related to inspections, appraisals and title insurance. Be sure to ask your lender what each fee is for and which fees VA buyers are not allowed to pay.
6. Gather Documentation
Include all the documents your lender requests with your application to improve your chances of getting the loan. You will likely need:
- Proof of income
- Proof of child support or alimony for you or your spouse
- Military verification
- A list of your assets and liabilities
- A home appraisal
7. Stay Within Your Area’s Residual Income Guideline
VA home loans include a residual income guideline — residual income is the amount of discretionary income you have each month after you satisfy your major expenses. The guideline varies depending on your household size and where you live, so find out what yours is before you apply for a loan.
8. Apply for a VA Loan and Prepare to Buy Your Home
Look for a real estate agent who is familiar with VA home loans and knows which local lenders provide them. Compare local lenders’ VA home loan rates and search for properties that will meet VA appraisal requirements. If you’re in the market for a condominium, boost your chances of getting a VA loan for one by looking at properties on a VA-approved condo list.
A VA home loan might help you realize the American dream of owning a home if you’re an active-duty service person, veteran or eligible surviving spouse. Visit the Veterans Benefits Administration website for more information on its home loan programs.
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