7 Things Veterans Need to Know Before Buying a Home

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Affording a home can be very difficult for many families. Between rising home costs, high interest rates, steep down payment requirements, and stringent credit score limits, conventional mortgages can be intimidating or even inaccessible. There are many mortgage types available to help make homeownership more accessible, one of which is specifically designed for veterans, active-duty service members, and surviving spouses. If you’re a veteran looking to afford a home for you and your family, you’ll want to know how to qualify, apply for, and determine if a VA loan is the right choice for you.

You May Qualify for a VA Loan

The Department of Veterans Affairs (VA) offers a homebuying program for qualified veterans, active-duty service members, and surviving spouses. The VA backs these loans to carry less risk to private lenders. These mortgages are excellent for many different families, as they offer more flexible options without requiring mortgage insurance or high down payments. VA loans for first-time homebuyers can make it easier to afford a home. You’ll need to obtain a Certificate of Eligibility (COE) through an online application or by contacting your lender. There are specific service requirements, including 90 days of active duty during wartime, 181 days of active duty during peacetime, or six years of service in the National Guard or Reserves. You’ll also need to live in the home as a primary residence. There aren’t technically strict limits on how much you can borrow, but there may be limits on guaranteed funds from the VA. If you’ve served in the armed forces, you’ll definitely want to see if you’re eligible.

Down Payment Requirements

One of the major benefits of a VA loan is that a down payment typically isn’t required. Down payment requirements can deter many homebuyers from starting the process due to a lack of affordability. If you go the VA loan route, you aren’t required to save up for a down payment on the price of the home. If you want to put money down for more equity, however, it may be a smart move to pay off your home quicker.

Private Mortgage Insurance (PMI)

Unlike other home loans that offer flexible down payment amounts, VA loans do not require private mortgage insurance from the borrower. Mortgage insurance is designed to protect the lender from financial loss in the event that borrowers are unable to make payments. Lower down payments mean a higher risk for lenders, so most mortgages with down payments under 20% require PMI. Through a VA loan, you can enjoy the flexibility of no down payment requirements without having to pay for it.

Look for Experienced Lenders

Not every lender offers VA loans, and even if a lender does, their experience with VA loans may vary. Make sure you compare lenders and their experience with VA loans. Veteran-owned lenders or those who work closely with veterans can provide you with more insight into VA loan qualifications, homebuying programs, and the limits you need to be aware of. Lenders who are inexperienced with VA loans may not provide up-to-date information during the application process.

Prepare for Closing Costs

While a VA loan doesn’t require a down payment, closing costs are still involved, including a one-time VA funding fee. Some veterans may be eligible to waive the VA funding fee; please check with your lender to determine if you qualify. Closing costs typically include lender fees, title insurance, property taxes, appraisal fees, and other related expenses. Expect to pay at least two to five percent of the home’s purchase price in closing costs. Inquire with your lender to determine the average closing costs for your area and the type of loan you are considering.

Improve Your Credit Score

While VA loans offer more flexible credit score requirements than conventional loans, there are still some credit limits you’ll want to be aware of. While there is typically no minimum credit score requirement through the VA loan program, individual lenders may have credit score requirements of at least 620. Even if you know your credit score is in good shape, you’ll want to make sure you eliminate as much debt as possible before the homebuying process; your debt-to-income ratio can limit how much loan you qualify for. Make sure to avoid taking on new debt or making late payments during the homebuying process.

Learn the Market

Finding the right mortgage is only part of the homebuying process. In order to find a good lender, real estate agent, and offer, you’ll want to research the market where you’re looking to buy. What is the average home price in your area? What are the home prices in the veteran-favored neighborhoods you’re looking at? How competitive is the market, and does it favor buyers or sellers more? You can do online research and learn from your real estate agent about the volatility of the market. The more you know about the local real estate market, the more informed your decision-making is regarding loans and home purchases.

Conclusion

Veterans often qualify for a home loan through the Department of Veterans Affairs, which offers more flexible down payment and credit score requirements. You don’t have to pay mortgage insurance for a VA loan, as the government backs it. Find a lender and real estate agent who are familiar and experienced with VA loans for the most success. Research the market you’re looking to buy in so you can make more informed decisions. Many veterans and their families find the homebuying process easier and more accessible through VA loans.