More than 21 million Veterans and service members live in the U.S., yet only about 6% have taken advantage of a VA home loan in the past five years. This percentage could be significantly higher if more Veterans understood the full scope of benefits this program offers.
Many Veterans and their families either aren’t aware of these advantages, believe the process is too complex, or haven’t worked with a lender knowledgeable about VA loans. Let’s clear the air and explore why a VA loan is one of the best mortgage options available.
One of the standout features of a VA loan is the option to purchase a home with $0 down. This is a game-changer for many Veterans who may struggle to save enough for a down payment, especially with rising home prices.
For comparison, most other mortgage options require a down payment of at least 3.5% to 5%, translating to $8,750–$12,500 on a $250,000 home. With a VA loan, that upfront cost disappears, allowing Veterans to enter homeownership sooner.
Additionally, VA loans eliminate the need for private mortgage insurance (PMI). For other loans, PMI typically adds $100–$200 per month to your mortgage payment if your down payment is less than 20%. This means VA loans save Veterans hundreds of dollars monthly.
Pro Tip: The VA funding fee replaces PMI and can be rolled into the loan amount, so you won’t need to pay it upfront.
If you have a service-related disability rating of at least 10%, you’re exempt from the VA funding fee. This can save thousands of dollars upfront and makes the VA loan even more affordable.
For Veterans who aren’t exempt, the VA funding fee is typically financed into the loan, allowing you to avoid an out-of-pocket expense at closing. The fee varies based on your service history and loan type, ranging from 0.5% to 3.6%.
Quick Fact: Veterans receiving VA disability compensation automatically qualify for a funding fee exemption.
One of the lesser-known benefits of a VA home loan is its reusability. Veterans can use this benefit multiple times throughout their lifetime, provided they meet certain requirements.
Here’s how:
Even Veterans who served decades ago can still use their VA loan benefit. Eligibility is based on service duration and time period, so it’s worth checking your status.
To verify your eligibility: Obtain your DD Form 214 and work with a VA-approved lender or access the VA’s eBenefits portal.
Unremarried spouses of deceased service members may also qualify for a VA loan. This benefit offers them financial support during a challenging time.
Eligibility applies if the service member:
Surviving spouses are also exempt from the VA funding fee, providing additional savings.
Related Topic: Prevent Annoying Credit Offers before starting the mortgage process – Opt out at www.optoutprescreen.com
VA loans often feature interest rates about 0.25% lower than conventional loans, saving you money over the life of the loan. These competitive rates are possible because the VA guarantees the loan, reducing the lender’s risk.
Even Veterans with less-than-perfect credit scores may qualify for these favorable VA loan rates, making homeownership more accessible.
Did You Know? VA loans also boast some of the lowest foreclosure rates, a testament to Veterans’ commitment to homeownership.
VA loans are more forgiving than conventional loans when it comes to credit requirements. There’s no minimum credit score required by the VA, though individual lenders may have their own criteria.
Even Veterans with a past bankruptcy or foreclosure can qualify, as long as they’ve reestablished credit for two years. This flexibility ensures that financial setbacks don’t prevent Veterans from achieving homeownership.
Important Note: If a previous foreclosure involved a VA loan, the remaining amount owed must be repaid to restore eligibility.
The VA loan program isn’t just for purchasing a home. Veterans can choose from a variety of options tailored to their needs:
VA loans are more forgiving than conventional loans when it comes to credit requirements. There’s no minimum credit score required by the VA, though individual lenders may have their own criteria.
Even Veterans with a past bankruptcy or foreclosure can qualify, as long as they’ve reestablished credit for two years. This flexibility ensures that financial setbacks don’t prevent Veterans from achieving homeownership.
While the VA backs these loans, they’re issued by private lenders, such as banks, credit unions, and mortgage companies. This allows Veterans to enjoy competitive terms and the convenience of working with a local lender.
Quick Tip: The VA guarantee ensures lenders will be repaid, enabling them to offer better rates and terms to Veterans.
VA loans can be used to purchase a variety of properties, including:
Condos are particularly attractive for first-time homebuyers, offering affordability and access to desirable locations.
Search for VA-approved condos: Use the VA’s online condo search tool to explore approved communities.
VA loans offer a unique combination of affordability, flexibility, and financial protections, making them one of the most valuable benefits available to those who have served our country. With no down payment, competitive interest rates, and no PMI, they help Veterans and their families achieve homeownership without the traditional financial barriers. Beyond the cost savings, VA loans offer peace of mind through borrower-friendly terms, such as flexible property options and protections for those facing financial hardship. Whether you’re purchasing your first home, refinancing, or upgrading to meet your family’s needs, VA loans are a powerful tool to help you build a stable and secure future. If you’re eligible, it’s worth exploring how a VA loan can make your homeownership dreams a reality.
Ready to make the most of your VA loan benefits? Getting preapproved is the first step toward unlocking the advantages of this incredible program. Reach out to us today to start your journey to homeownership with expert guidance and a smooth, stress-free process. Let’s get you one step closer to your dream home!
A VA loan is a mortgage program created by the U.S. Department of Veterans Affairs to help Veterans, active-duty service members, and certain surviving spouses buy or refinance a home. Eligibility typically requires meeting one of the following conditions:
Your lender can help confirm eligibility by obtaining your VA Certificate of Eligibility (COE).
No, one of the biggest benefits of a VA loan is the option to buy a home with no down payment, making homeownership more accessible to Veterans who may not have significant savings.
The VA funding fee is a one-time payment that helps keep the VA loan program running without requiring taxpayer funding. This fee is based on your loan amount, type of loan, and whether it’s your first time using your VA loan benefit.
For example:
If you have a service-related disability, you may be exempt from paying this fee. Additionally, the funding fee can be rolled into the loan amount instead of being paid upfront. – Source: VA.gov
Yes, VA loans offer several refinancing options:
Absolutely! The VA loan benefit is reusable as long as you meet the eligibility requirements and pay off any previous VA loan. You can also restore your benefit if you sell your home and pay off the loan completely.
No, VA loans are available to eligible Veterans and service members, whether they’re buying their first home or their fifth. There’s no limit to how many times you can use your VA loan benefit, provided you still qualify.
VA loans are intended for primary residences, meaning the home you plan to live in full-time. You cannot use a VA loan to purchase a vacation home or investment property.
VA loans can be used to buy a variety of property types, including:
The VA does not set a specific credit score requirement, but most lenders do. Typically, you’ll need a credit score of at least 580-620 to qualify. However, VA loans are more flexible with credit standards compared to conventional loans, making them accessible to borrowers with lower scores.
The VA provides financial counseling to borrowers who are struggling with payments. Additionally, because VA loans tend to have lower foreclosure rates, lenders may be more willing to work with you to find a solution, such as loan modification or repayment plans.
If you have full VA entitlement, there are no loan limits, meaning you can borrow as much as a lender approves without a down payment. However, lenders will still evaluate your income, credit, and debt-to-income ratio to determine how much they’re willing to lend.
Yes, VA loans allow sellers to contribute to the buyer’s closing costs, up to 4% of the loan amount. This can include paying off debt to help the buyer qualify or covering prepaid expenses like property taxes and homeowners insurance.
Yes, VA loans come with a built-in Escape Clause that protects buyers. If the home’s appraised value is lower than the purchase price, you can back out of the deal without losing your earnest money deposit.
Ready to see what you can afford? Contact us today to discuss your home-buying goals and take your first step toward financial freedom.
Equal Housing Lender. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. The pre-approval may be issued before or after a home is found. A pre-approval is an initial verification that the buyer has the income and assets to afford a home up to a certain amount. This means we have pulled credit, collected documents, verified assets, submitted the file to processing and underwriting, ordered verification of rent and employment, completed an analysis of credit, debt ratio and assets, and issued the pre-approval. The pre-approval is contingent upon no changes to financials and property approval/appraisal. *Veterans Affairs loans require a funding fee, which is based on various loan characteristics. Sales price cannot exceed appraised value. Refinancing an existing loan may result in the total finance charges being higher over the life of the loan. Offers may vary and are subject to change at any time without notice. Interest rates are subject to change daily and without notice. *On an Interest Rate Reduction Refinance Loan (IRRRL) the Veterans Affairs does not require an appraisal, but NFM Lending may require a drive-by-appraisal. Income documentation is not required, but source of income must be verified. **Purchases only, must have Automatic Underwriting System (AUS) approval. No cash-out under 600. †Sales price cannot exceed appraised value. ††In a purchase transaction, reasonable closing costs may be paid by the seller, and the program is available with no points depending on credit profile, collateral, and current mortgage history.
The Veterans Affairs (VA) loan is just one benefit military members can use as a reward for their service. Its generous terms and flexible requirements have helped numerous families achieve homeownership, but there are still things many people get wrong about the VA loan. Here are some of the most common myths about the VA loan, debunked.
Myth: The VA loan is Only for Active-Duty Military and Veterans
You wouldn’t be wrong if you thought active-duty service members and veterans were the most prominent beneficiaries of the VA loan, but they aren’t the only populations that can use it. National Guard and Reserve members may be eligible for a VA loan if they have served six or more years or have at least 90 consecutive days of active duty, as well as an acceptable type of discharge as determined by the VA. Surviving spouses may also be able to use a VA loan if they can obtain a certificate of eligibility (COE) and meet certain conditions, like remaining unmarried at the time of application and if the Veteran died while serving or due to a service-related disability.
Myth: The VA Loan is Bad for Sellers
The VA loan has made homeownership possible for millions of military families since 1944, but there are still sellers who are wary of it. Some believe that because VA loans don’t require a down payment or private mortgage insurance (PMI), military buyers are riskier. This couldn’t be further from the truth. VA financing can fully cover the mortgage prices in many cases, and it will guarantee up to 25% of the loan in case of default. VA buyers also have more money to put towards the offer.
Another misconception is that sellers have to pay all of the buyer’s fees at closing. To maintain affordability, the VA limits homebuyers from paying certain unallowable fees. The VA states sellers have to pay for a termite inspection, real estate agent fees, brokerage fees, and buyer broker fees. There are more closing costs that VA buyers can’t pay, but that doesn’t mean the seller is obligated to pick up the tab for all of them. Lenders and agents may cover some of the unallowable fees, and buyers can negotiate with sellers to pay them. It’s important to note that sellers can’t pay more than 4% in seller’s concessions for a VA loan.
Myth: VA Loans Have No Closing Costs
Even with the cost-saving features of the VA loan, it’s not entirely a free ride. There are still closing costs, including a funding fee unique to the VA loan. The funding fee is a one-time payment that helps reduce taxpayer expense to fund the loan. The fee ranges from 1.4-3.6% of the loan amount depending on the down payment amount. Though a down payment isn’t required, the more you can contribute, the lower your fee. You can pay it upfront at closing, roll it into your mortgage, or ask the seller to pay it. For any subsequent uses of your VA loan, the funding fee can be higher if you have a down payment less than 5%. There are a few situations in which the fee may be waived, like in cases of a service-related disability or for an eligible surviving spouse. If you’re concerned about closing costs, consider asking your lender for a lender credit or negotiate with the sellers for a contribution. Again, sellers can pay up to 4% in closing costs.
Myth: The VA Appraisal is Too Strict
The mandatory VA appraisal is another thing that makes the VA loan distinct from other loans, and many people are intimidated by it. Properties need to have an appraisal done to assess fair market value and the home’s safety and sanitary conditions. The appraisal is not the same as a home inspection, as a true inspection is more thorough. An independent appraiser will review the home against the VA’s list of minimum property requirements (MPRs). Issues appraisers will look for include exposed wiring, termite damage, and adequate drainage. If the home doesn’t meet the MRPs, the problems will need to be fixed before proceeding. Sellers and buyers should negotiate expenses. An appraisal also uses housing market data to see whether the proposed loan amount is comparable to that of similarly valued homes. Though the VA appraisal may seem tedious, it’s not much different than a standard appraisal. Homeowners who have maintained their home shouldn’t be too worried about major issues appearing.
Myth: VA Loans Can Only be Used Once
Luckily, the VA loan can be taken out multiple times as long as you have entitlement to use. Entitlement is how much the VA will guarantee the lender if you default. When you first use a VA loan, you have full entitlement. This means you can buy a home at any given price with no down payment, so long as your lender approves you for a mortgage. If you’ve fully paid off and sold your VA-financed home, your full entitlement is restored for your next purchase. It’s even possible to have more than one loan out at once if you use any remaining entitlement to buy another home. Be aware that if you’re buying with reduced entitlement, you’ll likely need a down payment.
The VA loan isn’t just a lucrative loan program, it’s a benefit you’ve earned through service. The intricacies of the loan have led to misunderstandings among military homebuyers and home sellers alike, which is why it’s crucial to work with a lender and real estate agent with a strong track record of working with VA homebuyers.
If you have any questions about the home buying process, contact one of our licensed Mortgage Loan Originators. If you are ready to buy a home, click here to get started!
For informational purposes only. You should refer to the VA for specific guidelines regarding your eligibility.
The VA renovation loan doesn’t get as much attention as the regular VA loan, but it should. If you’re an active-duty service member or military Veteran, this loan program can help you buy and repair a home without sacrificing affordability or convenience. Here’s what you should know about the VA renovation loan.
What is a VA Renovation Loan?
The VA renovation loan, also called a VA rehab loan, is a specialized form of the VA loan. It’s essentially the same as an FHA 203k loan, but backed by the Department of Veterans Affairs. The VA rehab loan allows you to buy or refinance a home while also paying for repairs to make it more livable. Instead of taking out another loan to pay for renovations, you’ll only have one mortgage and one monthly payment. This streamlined option can be great if you’ve found a house within your price range but is in less-than-ideal condition. For homeowners who want to refinance, the renovation loan can also lower your mortgage payments.
Like a standard VA loan, basic eligibility is the same, and you won’t need to worry about a down payment or needing private mortgage insurance (PMI). Since the loan amount will be based on the home’s as-completed value, you’ll need provide your lender quotes from your chosen VA-certified contractor. As part of the loan’s condition, all work on the home has to be done by a contractor with this builder ID; you can’t do any repairs yourself, either. The maximum amount you can borrow for repairs varies depending on your lender, though a ceiling of $50,000 is common. Even though a VA rehab loan doesn’t involve a down payment, you may be required to pay a funding fee.
How Can I Use It?
The loan must be used to renovate a single property that will be your primary residence; you can’t rent out or flip the property afterwards. Any repairs you plan to make need to improve its safety and livability, not just its appearance. For example, you could get new appliances or replace your HVAC system, but you can’t install a pool or start landscaping projects. The loan doesn’t cover projects that would alter the structure of the home, meaning you wouldn’t be able to add an addition or move load-bearing walls. Once the loan is approved, repairs need to be completed within 60 days from the closing date. During the repair phase, your contractor and lender need to be in close contact to ensure timely progress and fund disbursement. Once the project is finished, a VA appraiser will give your home a final review to verify that it meets the VA’s minimum property requirements (MRP).
The VA renovation loan gives servicemembers, Veterans, and their families more choices when it comes to homebuying. Whether you’re on the market for a new home or already own, the VA renovation loan makes it even easier to have a home that fits your needs.
NFM Lending is proud to offer the VA renovation loan to qualified borrowers. If you are interested in using a VA renovation loan to buy or refinance your home, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!