Your VA Home Loan
What Is the VA Home Loan?
A VA home loan is a mortgage loan guaranteed to most members of the military, veterans, reservists, and the National Guard by the U.S. Department of Veterans Affairs. The loan is issued by approved lenders, not the VA itself.
Who Qualifies For The VA Home Loan?
If you’re a member of the military in good standing, you probably do or will qualify for the VA home loan. You can find more details about eligibility here.
Facts About The VA Home Loan
When it comes to navigating the VA home loan, there are several commonly misunderstood details that can prevent veterans and active duty military members from taking full advantage of what is arguably one of the best military benefits available.
We frequently see people missing out on a great opportunity because they were either not properly informed about their VA home loan or they were given bad information from someone that they believed was an authority on VA home loans, such as a Commanding Officer, family, friends, Realtors, and even lending professionals.
To make sure that you do not miss out on the opportunity and advantages that the VA home loan offers you, we are dispelling the most common myths and answering the most common questions when it comes to the VA home loan.
How Many Times Can I Use The VA Home Loan?
You don’t have to “save” your VA home loan or look for other home loan options if you’ve used your VA loan once! As long as your VA entitlement is in good standing, you have access to your VA home loan benefits. That means that, whether it’s your first home purchase or your tenth, there is no limit to how many times you can use your VA home loan.
Does It Matter When You Use Your VA Home Loan?
If you are planning to exit the military, you’ll want to be strategic about when you use your VA home loan. If you are within 12 months of your ETS (estimated time of separation) and plan to go back to civilian life, lenders won’t be able to use your existing military income to qualify you for a VA loan because they’ll be unsure of your post-military income.
This may make it difficult to obtain a loan during this time, but we encourage you to talk with a qualified VA lender to go over your options.
If you are within 12 months of your ETS and you haven’t reenlisted yet, but plan to, you will simply need to get a Statement of Service from your commanding officer that confirms your eligibility and intentions to reenlist.
Can I Have Multiple VA Home Loans In Place Simultaneously?
It is entirely possible to qualify for a second VA home loan while you have a current home financed with your VA. Although an option to buy a second home isn’t limited to any one scenario, it is especially helpful for active duty military members who are being transferred. They will have the option of keeping their previous home and renting it out (to offset the mortgage), while also buying a new home at their next duty station, as long as the new purchase will become their primary residence.
Regardless of rank, each veteran (honorably or medically discharged) and active duty military member receives an entitlement of $484,350.00 ($121,087 being the 25% VA guarantee to the lender). Qualified applicants can choose to buy one home up to that amount or split that amount between two home loans.
If the final price of one home or the combination of two homes is less than $484,350, then you are eligible to purchase with no down payment required. If the purchase amount (or amounts) exceeds your VA entitlement, you are still eligible to still buy the home (or homes) but will need to make a down payment of 25% of the amount that exceeds $484,350.
INSIDER TIP: Buyers or their agents can often negotiate the seller to pay a portion or all of the down payment differences when exceeding the $485,350, as long as it does not exceed 4% of the sale price. Many Realtors® and lenders might think this is not possible because with any other home loan this would be considered an inducement to purchase and not allowed. However, the VA home loan guidelines do permit this.
How Much Will My Down Payment Be With The VA Home Loan?
You read that right, there is absolutely zero down payment required when using the VA home loan, unlike most loan programs which require a minimum of 3%-5% down (outside of First Time Home Buyer programs). Plus, the VA home loan doesn’t require monthly mortgage insurance like other loan programs, saving you a substantial amount of money each month.
For VA loans closed on or after January 1, 2019, the maximum loan amount for 1 Unit SFR, without additional down payment from the veteran, in non-high cost counties is $484,350. The ceiling for most high-cost counties, without additional down payment from the veteran, ranges from $517,500 to $726,525 depending on the County. You can learn more about where your county falls here.
NOTE: El Paso County Colorado (encompassing Colorado Springs, Fountain, Monument, Peyton, Falcon, and Manitou Springs is $484,350.
What Is The Role Of Veteran Affairs?
Unlike with other military benefits like the GI Bill and TRICARE, the VA doesn’t directly provide mortgage assistance to homebuyers. Rather, they give approved lenders a guarantee that the loan will be repaid.
Veteran Affairs has guidelines (commonly referred to as "VA Guidelines") that approved lenders must follow in order to have a home loan backed by the VA guarantee. If a veteran or military member defaults on their loan (foreclosure, short sale, etc.), the VA will then reimburse that lender a portion or all of their losses, up to 25% of the purchase price of the home. It’s this guarantee, commonly referred to as the “VA Guarantee”, that allows borrowers to obtain 100% financing with no down payment required.
Approved VA lenders are not confined to military niche banks or mortgage companies that use "VA" or "Veteran" in the company's name. You should explore several options and talk to other local lenders (especially in Military towns) who may be able to bundle your VA home loan with additional tax credits and local benefits.
How To Get Started
The first step is to get prequalified.
Prequalification quickly determines how much money a prospective homebuyer will be eligible to borrow before a loan is applied for.
When talking to a lender and completing the prequalification, you will let them know you have access to the VA home loan. Keep in mind, although many lenders can complete a VA home loan for you, not all lenders specialize in VA home loans. Using a VA specialized lender will ensure and that you are taking advantage of all the VA home loan benefits and that your loan goes smoothly.
Does It Cost Anything To Get PreQualified To Use The VA Home Loan?
Absolutely not! It does not cost anything to get prequalified, nor are you obligated to use that lender or to even buy a home after being prequalified. Getting prequalified also does not encumber or affect your VA entitlement in any way.
How Long Does It Take To Get PreQualified?
In most cases, it only takes minutes to complete a prequalification and receive the results! Most lenders today can handle this over the phone and may even have a secure online prequal form available online.
What Information Is Required To Get PreQualified?
Prequalification questions can vary slightly, but they will look something like this:
- Full name of those that would be on the loan
- Date of Birth
- Social Security Number
- The last two years of work history
- Employer (Branch of Service & paygrade if active duty)
- Where you have lived in the last two years
- Income (they can look this up if you are active duty)
- Assets (generally just a ballpark balance of bank accounts)
When Can I Start Looking At Homes And Make An Offer?
After completing the prequalification, the lender will tell you if you are prequalified and the amount you are qualified for. At that time, you will discuss what price range is within your monthly budget (or BAH). You may even be able to complete a prequalification, learn you are prequalified, and start looking at homes all within the same day.
We would strongly encourage you to get prequalified sooner than later. This allows you to know all your options when you are ready to purchase a home.
Now that you know what a VA home loan is and how to use it, are you ready to take the plunge? If you are, we encourage you to ask your real estate agent who the local lending authority is when it comes to VA home loans.
Working with a real estate agent that knows the ins-and-outs of the VA home loan can save you thousands of dollars and help put you in a home much sooner than you may have originally thought. Since there is no down payment requirement, you really can start looking at houses for sale today.