With house prices soaring in the country and the rest of the world, securing a home loan can be more challenging these days. Fortunately, government-backed housing loans are available to make owning a property less problematic than it should be.
The Veteran Affairs home loan program—established by the United States Department of Veterans Affairs—is a valuable resource designed to empower eligible military service members, veterans, and specific surviving spouses with a path to homeownership. If you are considering leveraging this exceptional benefit to secure your dream home, read on to navigate the process with confidence and ease.
Understanding How VA Home Loans Work
The VA itself does not issue loans. Instead, it partners with private lenders, such as Security America Mortgage, banks, credit unions, and other mortgage companies, to provide VA home loans. The VA sets the guidelines and requirements for the loan program, and these approved lenders follow these guidelines while offering loans to eligible borrowers.
The VA guarantees a portion of each loan, which means that if the borrower defaults, the VA will cover a part of the loss incurred by the lender. This guarantee effectively diminishes the risk for lenders, thereby inspiring them to offer more favorable terms to borrowers. Such advantageous terms could include a low to non-existent down payment requirement, reduced interest charges, and the elimination of private mortgage insurance (PMI).
The partnership between the VA and approved lenders benefits both parties. Lenders can extend loans to a larger customer base, while the VA can support its mission of helping service members, veterans, and eligible surviving spouses become homeowners.
What To Look For In A Lender
Use the VA’s Lender Search tool on their website or ask for recommendations from your local VA office or friends who have successfully obtained VA home loans. This guarantees that you are working with a VA-approved and reputable lender.
When selecting a VA home lender, make sure they are VA-approved and offer competitive rates and terms. Consider their reputation, experience with VA loans, and customer service quality. Choose a lender that offers a streamlined pre-qualification process and in-house underwriting, complemented by deep knowledge of the local real estate market. Look for additional programs or services that can further enrich your home-buying experience. Comparing multiple lenders will help you find the best fit for your needs.
Choosing the best lender requires borrowers to compare loan offers from multiple lenders. This means you must shop around and find out their interest rates and terms. Align these terms to your financial situation and goals. Understanding your chosen lender’s policies and requirements is equally crucial to ensure a smooth and successful loan application process.
Eligibility Criteria For VA Home Loans
There are four classifications of individuals eligible for a VA home loan. Before applying, you must fall into one of the following categories:
- Service Members: This includes active-duty personnel who have dedicated at least 90 uninterrupted days of service during periods of war, or a minimum of 181 days during times of peace.
- Veterans: Those who have completed their service with an honorable discharge and meet the service duration requirements mentioned above.
- National Guard And Reserve Members: Members with at least six years of service and an honorable discharge, placed on the retired list, or transferred to the Standby Reserve or Ready Reserve after honorable service.
- Surviving Spouses: The includes the spouses of service members who, sadly, passed away while on active duty—or due to a service-related disability—who did not choose to remarry. It also covers spouses of those who have previously served in the armed forces, known as veterans. It also includes the spouses of servicemen who are officially classified as missing in action (MIA) or held as prisoners of war (POW).
Note that meeting the minimum service requirements does not guarantee loan approval applicants must also meet credit and income standards set by the VA and the lender. Even though VA-approved lenders follow the VA’s guidelines, they still have the freedom to set their own credit and income requirements. As a result, borrowers must also meet the specific requirements set by the lender they choose to work with.
7 Steps to Apply for a VA Home Loan
Applying for a home loan may vary depending on your chosen lender. In general, they involve these processes:
- Obtain Your Certificate Of Eligibility (COE): You need to get your COE before applying for any type of home loan. Such a document proves to the lender that you meet the eligibility requirements. Apply for a COE online can be done through the eBenefits portal or by mailing a form to the VA.
- Find A VA-Approved Lender: Not all lenders offer VA home loans, so it’s essential to find one that does. You can search for VA-approved lenders on the VA website or ask for recommendations from friends or colleagues.
- Pre-Qualify For The Loan: Reach out to the lender to pre-qualify for the loan, which will give you an idea of how much you can borrow. This step helps you determine your budget and narrow your home search to properties you can afford.
- House Hunting And Making An Offer: With your pre-qualification details, collaborate with a real estate agent to identify the ideal home. After discovering the perfect property, submit an offer, ensuring that it adheres to the VA’s Minimum Property Requirements (MPR).
- VA Appraisal And Inspection: Once your offer is accepted, the lender will order a VA appraisal to assess the property’s value and ensure it meets MPR. A home inspection, though not required by the VA, is highly recommended to identify any potential issues with the property.
- Finalize The Loan: After the appraisal and inspection are complete, your lender will review your financial information, verify your employment, and perform a credit check. They’ll finalize the loan once everything is in order and provide you with a clear-to-close status.
- Closing: On the closing day, you’ll sign the final loan documents and take possession of your new home. The closing process also involves paying any required closing costs and fees. Some states may require attorneys to validate the documents and the sale.
The process takes up to 50 days or one and a half months on average, depending on factors like your location, the housing market situation, your lender, and the previous property owner.
Final Thoughts
VA home loans present a remarkable opportunity for qualified service members, veterans, and surviving spouses to experience the numerous advantages of homeownership. By gaining a thorough understanding of the eligibility criteria and familiarizing yourself with the application process, you can confidently embark on the path toward securing your dream home.
With the support of the VA and its partnerships with approved lenders, homeownership becomes a more attainable reality for those who have bravely served our country.
