Buying a home is a massive financial decision that can be overwhelming to some people. But the process doesn’t have to be so difficult if you’re a veteran. Veterans have access to a number of home loan programs not available to the general public, such as a VA loan. If you’re a veteran who wants help navigating the home-buying process, here are three important tips to take into consideration.
Understand What a VA Loan is & How it Works
Over 21 million veterans currently live in the United States, and yet a mere 6% of them used a VA loan to purchase a home in the past five years. Why is that percentage so small? It may be because many veterans don’t understand the benefits of a VA loan or are intimidated by the complexity of the process.
However, if you’re a veteran planning on buying a home, you should seriously consider applying for a VA loan. It’s one of the best lending programs in the country—it can make it easier to buy the house you want and allow you to pay less money in the long-term. So, let’s go over what a VA loan is and the benefits it offers.
What is a VA Loan?
A VA home loan is a specialized type of financing available to most veterans and current service members. The loan is provided by private lenders, such as banks, mortgage companies, and credit unions, but insured by the US Department of Veterans Affairs.
In other words, the Department of Veterans Affairs makes an agreement with a private lender that it will repay the loan in case you, the veteran, are unable to continue making payments. This gives lenders a greater sense of security and allows them to offer you a mortgage with more flexibility, lower rates, and better terms.
In case you don’t qualify for a VA loan, or just want to explore other veteran-oriented loan programs, do some research and see if your state offers any benefits. For example, CalVet Home Loans is available to any veteran who wants to buy a home in California, and in most cases offers no down payment and lower rates on mortgages for California veterans.
What are the Benefits of a VA Loan?
There are many benefits that accompany a VA loan that, in many ways, makes it superior to a conventional home loan. Here are a few of the main benefits that a VA loan provides:
- No down payment required on a mortgage
- You don’t have to pay private mortgage insurance
- You can secure financing with a lower credit score
- Interest rates on VA loans are usually 0.25% lower than rates on conventional loans
- Closing costs, such as escrow and settlement fees, are typically covered
These are just a few of the most important financial benefits tied to a VA loan. There are other perks, too, such as the fact that as a veteran your eligibility for a VA loan never expires. Even if you served decades ago, you can still take advantage of the program.
Additionally, if you already bought a home using conventional financing and now you want to capitalize on a VA loan, you can still do so by refinancing. It doesn’t matter whether or not you originally purchased a home using a VA loan, you always have the option to use a VA refinance to try to quickly secure a lower interest rate on your current mortgage.
Find a Good Realtor
If you’re a veteran in the market for a home, it’s essential that you find a good realtor who is able to cater to your unique needs. You’ll want to find a real estate agent who is knowledgeable when it comes to VA loans and veterans’ housing programs, so that you can take full advantage of the benefits available to you. In addition to that, get a realtor who’s familiar with the local market—for example, if you plan on buying a house in the Dallas area, then look up the best real estate agents in Dallas.
Shop around for different real estate agents, and different lenders, and make sure that they can answer any questions you have. Since you’re preparing to make a huge financial decision and the home buying process can be tricky, you’ll want to have someone by your side who knows what they’re talking about to guide you through it.
Just because VA loans don’t have the same credit requirement as conventional loans doesn’t mean you should ignore your credit score entirely. Even when applying for a VA loan, having a good credit history and a high credit score will allow you to secure better terms on your mortgage. So try to build credit, check your credit score regularly, and put yourself in a good financial position that allows you to pursue the house of your dreams.
You’ve worked hard for these benefits, so take advantage of them! Buying a home is a significant, and costly, decision, but if you keep these three tips in mind, you’ll likely be able to save big on financing.