You’ve made it to ETS. Whether you’ve been honorably discharged or you’re retiring from service, welcome to the Veteran club. Now comes the next stage in your journey – the one where you’re not fighting for your life day in and day out. That can be a good thing and a bad thing.
For many Vets, one of the first steps in their transition to civilian life is to find permanent housing off-base. If you’re in that spot right now, you’ll need to brush up on your knowledge of the VA home loan.
We’re not gonna sugar-coat it for you. There is A LOT of stuff you’re gonna need to know. Treat this as your final deployment into the civilian world, and get strapped in, soldier.
- What Is a VA Home Loan?
- VA Home Loan Benefits
- How Does a VA Home Loan Work?
- VA Home Loan Requirements
- How To Apply for a VA Home Loan
- VA Home Loan Calculator
- VA Home Loan Lenders
More on Veterans’ benefits: 8 Great Military Retirement Benefits to Get Your Post-Military Life Started Right
What Is a VA Home Loan?
So, what is a VA home loan? Well, it’s a loan… for a home. What did you think it was? Veterans home loans make it easier for Vets to find housing outside of base (we know you probably haven’t lived off base since you were at least a pimply 18-year-old). But now you’re a grown-a** adult, and it’s time to own your own home. But you don’t have to do it without help.
A VA home loan is the perfect option for Vets because it offers a lot of benefits that you won’t get from an average civilian bank loan. If you’re a Vet who’s looking for a loan to buy a house, you’ll be glad to know that the VA home loan is pretty superior to anything else you’ll be able to find because all of your options will be backed by the VA.
A VA home loan is offered by private lenders, like your mortgage companies. There are also different types of VA home loans for different situations.
Types of VA Home Loans
1. Cash-Out Refinance Loan
Do you have crushing debts that remind you of all your shattered six-figure dreams? If you want to cash out of your home equity, you can do it with this option. This is a great choice for people needing to pay for tuition, who may have hefty medical bills, or who have other debts that just won’t go away no matter how hard you try to forget them.
Is your financial security on your mind? Explore ways to build wealth with your military pension & VA disability to have a better retirement!
2. Interest Rate Reduction Refinance Loan (IRRRL)
Maybe you already took advantage of a VA home loan. If you’re looking for more stability in your monthly payments (or maybe even that oh-so-juicy payment reduction), look into getting an IRRRL loan.
3. Native American Direct Loan (NADL)
If you’re a Native American Vet or married to one, you may qualify for the NADL. This loan will allow you to receive money to build a new home, improve an existing one, or just buy a home on federal trust land.
4. Purchase Loan
When you think “VA home loan,” this is probably the loan type you’re thinking of. This is the VA home loan that lets you get a loan backed by the VA to purchase a new home.
VA Home Loan Benefits
One of the most common VA loan questions we get is, “Why would I go with a VA home loan over other options?” There are tons of reasons to go with a VA home loan over a standard home loan.
1. No Down Payments
First, you don’t have to worry about down payments. Yeah, you know, the biggest up-front cost of acquiring a new home that prohibits hundreds of thousands of adults from being able to purchase? You don’t have to deal with that. The VA itself does not require those who receive a VA home loan to pay any down payment.
Honestly, that’s enough to get most Vets on board right there! If you’re more skeptical about it, though, let’s look over more reasons why you’d be stupid not to take advantage of your VA home loan options.
2. Low Interest Rates
Next, VA home loans offer lower interest rates on average than standard home loans. No brainer! But if you are, in fact, lacking a brain today, don’t worry. We’re not done with the VA home loan benefits.
3. Low Closing Costs
Another thing that dissuades possible homebuyers is closing costs. The average closing cost when buying a new home, including taxes, is just over $6,000. Wouldn’t it be nice to be able to pocket that extra cash instead of having to shell out? Man cave, here we come!
4. Say Bye-Bye-Bye to PMI
Generally speaking, people who get an average loan are required to obtain PMI, or private mortgage insurance. This payment would usually be added to the monthly mortgage payment just in case you end up not being able to pay.
What’s that? Yeah, you read that right. PMI is basically the lender making YOU pay in case you STOP paying. That’s where we call bull sh*t, so it’s a good thing VA home loans don’t require you to pay PMI!
5. You Can Use It More Than Once
You don’t get just one VA home loan per lifetime. You can use a VA home loan multiple times – as many as you want! So if you don’t plan on retiring in the home you’re about to purchase, you don’t have to worry.
How Does a VA Home Loan Work?
The VA Home Loan Process
1. Obtain a COE
If you think you want to get a VA home loan, you’ll first need to obtain a COE, or a Certificate of Eligibility, to prove that you’re qualified for the loan. This can be obtained through multiple avenues, such as online, via your lender (if you have one already), or via snail mail.
2. Find a Lender
Next, you’ll want to do your research and find a VA home loan lender that can help you during the process.
3. Get a Quote
Your VA home loan lender can set you up to get a quote for the home you’re looking at. Most places don’t charge you to do a quote on your prospective home.
4. Add a VA Clause to Your Contract
After you get your quote, you’ll want to ensure that your real estate agent and lender include a “VA option clause” or “VA escape clause” in your purchase contract.
5. Lender Processing
Then, your VA home loan lender will look over your documentation, including employment, debts, and credit, and process the loan. Next, they’ll ask the VA to appraise the home to make sure it is worth what you were quoted.
6. Close on Your Home
Once the VA home loan lender has approved the appraisal and concluded that the terms in the contract are correct, you can close on your new home!
Ready to look for your new home? Check out our list of the 10 best states for military retirement. And no, it’s not just another listicle! Find out why we think these are the best states… and then decide for yourself!
How Much Home Can I Afford VA Loan?
There are technically no limits to how much you can borrow on a VA home loan. However, you’ll likely have a conforming loan limit, which will vary depending on which county and state you live in. A VA home loan lender can help you figure out what your limit is.
As a good estimate, the limit usually lies between $540,000 and $822,000 if you’re looking for a single-family home. As long as your home doesn’t exceed that max amount, you should be able to borrow plenty of money to cover your needs.
As far as your personal finances go, you’ll want to use a VA home loan calculator. This will allow you to put in information specific to your finances to determine how much you’ll be able to borrow and if you’ll be able to make the monthly payments on that amount, given the interest rate for your VA home loan.
How Many Times Can You Use VA Home Loan?
Your VA home loan is a lifetime benefit, meaning you can use it as many times as you need.
Does a VA Loan Require a Home Inspection?
No. You’ll only be required to obtain an appraisal of your home, which is a less-detailed version of a home inspection.
VA Home Loan Requirements
Now then, who qualifies for a VA home loan? If the name didn’t give it away, Vets qualify for VA home loans. But there’s more to it.
To be eligible for a VA home loan, you’ll have to fall under a certain Entitlement Code, of which there are 11. Most of these are service requirements, which vary depending on when you served.
However, there is an important code that you’ll need to look at if you’ve used your VA home loan benefits at least once before. This is Entitlement Code 05. It indicates that you have used your benefits once and that they have been restored, meaning you can freely use them again.
Entitlement Code 06 is also important, as it applies to surviving spouses of deceased, MIA, or POW military members.
As a general rule, the VA tells us the following regarding eligibility for VA home loans:
“A veteran is eligible for VA home loan benefits if he or she served on active duty in the Army, Navy, Air Force, Marine Corps, or Coast Guard after September 15, 1940, and was discharged under conditions other than dishonorable after either:
- 90 days or more, any part of which occurred during wartime, or
- 181 continuous days or more (peacetime).”
What Credit Score Is Needed for a VA Home Loan?
None! Instead of making a blanket rule about credit scores, the VA asks that lenders look at a person’s entire loan profile. Some lenders may require certain scores, but the VA itself does not impose any credit score restrictions.
When researching your VA home loan lender options, see if they have a minimum credit score listed.
How To Apply for a VA Home Loan
You’ll need to choose a VA home loan lender, apply and receive your Certificate of Eligibility, and receive pre-qualification* for the amount you want to borrow.
Once your lender processes this information, they’ll reach out for VA appraisal. After that, it’s pretty much the same as the standard home-loan and home-buying process.
*Note: Pre-qualification isn’t required, but it is recommended. It can save you from potential sticker shock and other nasty surprises in the loan process. We all know you don’t want to mess around where your money is concerned.
VA Home Loan Calculator
If you want to know just how much you may end up paying on a VA mortgage, you can use a VA home loan calculator. This allows you to personalize what you plan on borrowing, the cost of the house, what you want your payments to be, and how long you want to pay.
Check out an in-depth VA home loan calculator here.
VA Home Loan Rates
Current VA home loan rates vary depending on the type of loan you use, how long you plan on paying it, and more. VA home loan rates change every single day based on what’s going on in the housing market.
As a general rule, here’s what you can expect to see in 2021-2022:
- 15-year Purchase Loan: 2.5% interest, 2.823% APR
- 30-year Purchase Loan: 2.25% interest, 2.710% APR
- 15-year IRRRL: 2.25% interest, 2.71% APR
- 30-year IRRRL: 2.75% interest, 2.932% APR
- 15-year Cash-Out Refinance Loan: 2.25% interest, 2.795% APR
- 30-year Cash-Out Refinance Loan: 2.75% interest, 3.068% APR
What Is the Interest Rate on a VA Home Loan?
This is an important question to ask before setting out to purchase a home. In short, interest rates are what lenders are charging you to use their assets (money). The interest rate is applied to the amount of the loan.
For example, if you borrowed $400,000 for your VA home loan and the interest rate was 2.5% over a 30-year loan, your estimated total payment would be $568,974.00 with a monthly payment of $1,580.
For more information on how to calculate your own payments given a specific interest rate, click here.
Money matters! Learn more about finances on our trending blog: Life After the Military: 7 Secrets to Not Go Broke & Keep $ in Your Pocket
VA Home Loan Lenders
Now that you know how rates work, you need to start thinking about lenders. A good lender can make the entire homeownership process 1000% smoother, so choose wisely. If you’ve been looking for reputable, well-reviewed lenders for your VA home loan, we’ve got the inside scoop on the #1 VA home loan lender you should look to.
You can go to Churchill Mortgage for all your VA home loan needs. You can contact a loan specialist by calling them at 1 (888) 562-6200 or visiting the link below.
At Churchill Mortgage, they do things differently than your average mortgage company. Churchill understands everyone’s goals (both financially and in life) are different, which means your home loan needs will be different too. Their goal is to make sure you are set up for financial success and help give you the smartest path for homeownership, regardless of your starting point.
Put simply: Churchill is a lender with a different mission: Doing what’s right for you.
Now that you’re all brushed up on your VA home loan knowledge, you deserve a shot of something stout. Just remember to stay sober for closing day!
Looking for more information on VA housing benefits? Check out our newest blogs A Complete Guide to VA Renovation Loans and 8 Great Military Retirement Benefits to Get Your Post-Military Life Started Right.