The United States Department of Veterans Affairs seeks to serve our nation’s military members. Today, part of that support includes increased access to homeownership, namely through the VA loan (U.S. Department of Veterans Affairs).
The VA Loan
At first glance, the VA loan functions like any other home loan. While borrowers will first need to meet the Department of Veterans Affairs’ eligibility criteria (U.S. Department of Veterans Affairs), they may then apply for a loan through the VA or with a qualified mortgage professional, meet the lender’s requirements, and submit financial documentation like any other potential borrower. That being said, there are a few unique aspects of this specific loan program.
How Does the VA Loan Work?
The VA loan functions to provide increased access to homeownership for current and former servicemembers and certain surviving spouses. Essentially, the Department of Veterans Affairs guarantees the home loan, spurring more favorable terms and benefits. These might include lower interest rates and closing costs, little or no down payment or private mortgage insurance (PMI) required, no penalty for paying your loan off early and, in the event of missed payments, access to VA Loan Technicians. Additionally, VA loans typically have no burdensome qualification standards provided you meet the eligibility criteria.
How to Obtain a VA Loan
If you believe that you may qualify for the VA loan program, follow these steps:
- Confirm your eligibility. VA loans are only provided to current service members, veterans and eligible surviving spouses of members of the armed forces. If your service history and duty status are applicable, you’ll need to apply for a Certificate of Eligibility (COE) (U.S. Department of Veterans Affairs), which proves to the lender that you qualify for benefits. Keep in mind that the home must also be your primary residence.
- Determine if you are interested in a VA direct loan or a VA-backed loan (U.S. Department of Veterans Affairs). While the difference in phrasing may seem small, there are major differences between these two loan types. With a VA direct loan, the VA will serve as your primary lender. In other words, you’ll apply through and work directly with the VA throughout the life of the loan. VA-backed loans, on the other hand, are provided through a private mortgage professional and guaranteed in part by the VA. This allows the lender to offer better terms to military borrowers.
- Complete your home loan application. This process will include gathering financial documents, submitting to a credit score check and, when the loan application process is almost complete, scheduling a VA appraisal of the home.
- Study up on any relevant fees and expenses. For example, military borrowers typically pay a one-time funding fee (U.S. Department of Veterans Affairs) to offset some taxpayer costs. While this fee is often lower than a traditional down payment, some borrowers may choose to put more money down upfront and pay less over the life of the loan. The right answer and amount will depend on your unique goals and financial situation.
- Secure or refinance your dream home using the VA loan!
Wrapping up the VA Loan
Whether you’re currently serving or have in the past, the VA loan is one of the most powerful homeownership tools on the market. With the assistance of the Department of Veterans Affairs, servicemembers and veterans can enjoy favorable terms, start or continue the journey to homeownership and, eventually, finance their dream home.
For more information about the resources available through the U.S. Department of Veterans Affairs, visit their website (U.S. Department of Veterans Affairs). Some states also provide additional home-financing resources to eligible veterans, such as reduced property taxes. You can find out more here (U.S. Department of Veterans Affairs).
Published on February 21, 2022
