As part of its mission to serve the nation’s military members, the U.S. Department of Veterans Affairs provides several housing benefits to service members and their families, including assistance with home loans. If you or someone close to you has a military affiliation, it’s a good idea to know about the resources available. Here’s an overview.
Who’s eligible for VA loans?
Current service members, veterans and eligible surviving spouses of members of the armed forces can take advantage of VA home loan guaranty benefits and other housing programs. You’ll need to apply for a Certificate of Eligibility (COE) (U.S. Department of Veterans Affairs, 2020), which proves to the lender that you qualify for benefits. The COE is awarded based on your service history and duty status.
Then, you can apply for a VA-guaranteed loan through any mortgage lender that participates in the VA Home Loan Guaranty Program. You’ll need to meet the lender’s credit and income requirements, and the home must be for your personal occupancy.
The VA’s role in the mortgage process
Unlike what you may assume from the name, VA loans are provided by private lenders such as banks and mortgage companies, not the VA. The VA guarantees a portion of the loan, which allows private lenders to offer better terms to military borrowers.
The advantages of VA loans
Benefits of securing a VA loan include lower interest rates and closing costs, no down payment or private mortgage insurance (PMI) required and no penalty for paying your loan off early. If at some point you have difficulty making payments, you’ll also have access to VA Loan Technicians, who can help you explore all options to avoid foreclosure.
The fees that come into play
Generally, military borrowers must pay a funding fee (U.S. Department of Veterans Affairs, 2020). This one-time payment offsets some taxpayer cost, as the VA home loan program doesn’t require a down payment or monthly mortgage insurance premium. The fee can either be paid in full at closing or included in the overall loan amount and paid off over time. The amount you’re required to pay will depend on your military category, the type of loan you are applying for, whether you are a first-time or subsequent VA loan user and your down payment amount, if any.
Find out about the family benefits
Spouses and children of service members also make sacrifices while a loved one serves in the military. The benefits that come with financing a home through using a VA loan may mean the family is able to buy a bigger home or purchase in a stronger school district.
For more information about the resources available through the U.S. Department of Veterans Affairs, visit their website. Some states provide additional home-financing resources to eligible veterans, such as reduced property taxes. You can find out more here.
Published on November 9, 2020
