Current and former service members are in many ways the ideal loan recipients, mortgage experts say. That sentiment should boost the confidence of any troops or veterans looking for the best mortgage options for buying their first homes. As should the benefits of VA loans, which offer generous terms to veterans that civilians can’t get.
A recent report from the Consumer Financial Protection Bureau indicated that active-duty troops and veterans buying their first homes are forgoing conventional real-estate loans and other government-funded mortgage options in favor of VA loans. With that in mind, here are a few tips from experts for troops and veterans looking to buy their first homes.
- Take advantage of VA loans
The fact more people are using VA loans isn’t a fluke. For one, the VA provides 100 percent loans that eliminate the need for down payments. Most conventional loans require a down payment and usually only cover 80 or 85 percent of the home’s total value.
Unlike loans received through the Federal Housing Administration, VA loans don’t require a monthly mortgage insurance payment. In addition, veterans who receive monthly disability benefits don’t have to pay the VA’s funding fee, which can run from 0.5 to 3.3 percent of an overall loan.
- Know the VA loan process
Home-buyers must meet a few requirements in order to qualify for a VA loan, as the VA’s website details. As with other loan types, you must have strong credit and enough income to afford the home. But for VA loans, you need to apply for a VA Home Loan Certificate of Eligibility. The process has different rules depending on your military status.
After establishing your eligibility, the next step involves making sure you have all your necessary military service documentation handy. The most important form for this process is the DD214, a Department of Defense document issued whenever a service member separates from the military. The VA’s website also mentions that anyone applying for a VA loan needs “certification that you will occupy the home.”
Once you have your entire documentation ready, you can go to lenders like USAA and New Day USA who work directly with the VA to get the right loan for your situation.
- Do your homework
We encourage new home-buyers to make sure they understand all the fees that will be involved in their VA loans and arguably more importantly that their realtor does as well. If your realtor doesn’t understand VA loans, get to a realtor who has done VA loans before.
- Shop around
A VA loan is a great option for first-time home-buyers, but it’s certainly not the only one. You can also take out a loan through the Federal Housing Finance Agency, which includes secondary mortgage-loan lenders Fannie Mae and Freddie Mac.
There are also conventional real estate loans and other government-funded loans available through agencies like the Federal Housing Administration and United States Department of Agriculture. It’s also worth remembering that chances are you will be working with lenders who will be your middlemen for obtaining loans through any of these sources.
- Believe in yourself
If veterans are unsure how to go about buying their first homes, there is no shame in asking for help. Get the counseling that’s on the marketplace so the service member knows how to get the best rate possible. There are resources out there like VA loans designed to make the home-buying process easier for troops and veterans alike. It does make sense, especially for first-time home-buyers, to be able to maximize that opportunity and reduce that upfront out-of-pocket.