Taking advantage of your Veterans Affairs (VA) home loan benefit is undoubtedly worth it. Thanks to your service, you can expedite the dream and wealth of home ownership. Read on as I help you unlock the dream of home ownership with expert advice on how to use a VA home loan.
VA Loans Provide Veterans a Powerful Opportunity to Achieve Homeownership
VA home loans offer advantages such as the ability to purchase a home with zero to little money down and access lower interest rates. Active duty service members and veterans can qualify for a VA home loan as long as certain criteria are met.
What is a VA Loan
A Veterans Affairs (VA) is a type of mortgage offered and partially backed by the Department of Veterans Affairs. To obtain a VA loan, you can go through private lenders such as banks or mortgage companies. VA loans are for primary residences, not vacation homes or investment properties. In order to qualify for a VA loan, you’ll need to meet certain criteria.
Eligibility for a VA loan
One of the biggest requirements for VA loan eligibility is that one must meet the service requirements. Unlike other government-backed loans, VA loans do not have an income limit or set debt-to-income (DTI) requirement. Needless to say, one still needs to prove consistent and reliable income with manageable debt amounts. The best way to find out if you qualify for a VA loan is to apply, but first make sure you meet the service requirements.
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Minimum active duty service requirements must be met:
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Active duty service members: Must serve 90 continuous days without a break in service.
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Veterans: Service requirements vary depending on when the veteran served. For example, if you served between September 8, 1980, and August 1, 1990, the requirement is that one must have served 24 continuous months or the full period (a minimum of 181 days) that you were called to active duty or a minimum of 181 days if discharged for hardship or less than 181 days if discharged for a service-connected disability.
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National Guard and Reservist: Service requirements vary depending on when the service member served. For example, if you served between August 2, 1990 to present, the requirement is to serve at least 90 days of active duty.
How many times can you use a VA Loan?
VA loans can be used as many times as needed during an eligible party’s lifetime. While most only use one VA loan at a time, you may have partial entitlement to a VA loan if you haven’t fully paid off an existing VA loan. If the partial entitlement doesn’t cover 25% of the loan value you may have to provide a down payment. If you have never used a VA loan, you have full entitlement as you do if you’ve used a VA loan and paid the balance in full.
Key Benefits of a VA Loan
While VA loans are similar to conventional loans, the biggest differences are the down payment and interest rate. Similar to conventional loans, VA loans have closing costs, appraisal fees, and other upfront costs associated.
No Down Payment Required
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VA loans do not require a down payment, although if you’d like to put money down, you can. Mustering up a down payment is often one of the biggest hurdles when it comes to purchasing a home. With a VA loan, there are still closing costs and other associated costs that may need to be paid in cash. In some cases, it can be negotiated that the seller pays these fees for the buyer. Together, we can work to find the right home and solution to any obstacles that may stand in the way.
Competitive Interest Rates
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Compared to conventional loans, VA loans often offer lower interest rates. Oftentimes, they are some of the lowest on the market. Even a slightly lower rate can equate to a significant savings in interest over time. In addition, a lower rate helps keep payments down. Similar to conventional rates, VA loan rates vary depending on the market.
No Private Mortgage Insurance (PMI)
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PMI is a type of insurance that offers lenders protection in the event a borrower defaults on a mortgage. For conventional loans, PMI is usually included as part of the monthly installment. However, VA loans do not require PMI as they are partially backed by the government, which is some of the best protection for lenders.
Flexible Credit Requirements
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VA loans have flexible requirements to qualify when it comes to requirements such as income and debt-to-income. While applicants need to prove stable and plentiful income and a manageable debt amount, there are no set limits for qualifying. In addition, VA loans do not have a minimum credit score requirement, but the lender can. Since the loan is partially backed, lenders may have less strict requirements for VA loans.
Challenges of Using a VA Loan
While VA loans offer tremendous benefits, there can be challenges too. Similar to conventional loans, you’ll need to meet the requirements. In addition, you may face high monthly mortgage payments as a tradeoff for putting zero money down. With the aid of an experienced realtor and lender, the home buying process can be seamless, but that doesn’t dismiss the big decisions at hand. One of the best ways to overcome challenges in the home buying process is to prepare for them and work with a trusted agent you’re comfortable sharing information with. Here are some challenges of using a VA loan that are not always considered.
Seller Bias in Competitive Markets
Some sellers or selling agents may have an unrealistic bias when it comes to VA loans. Some of the factors that can contribute to this bias are the qualifications of the buyer, closing time, and appraisal process. Starting with the qualifications of the buyer, a seller may worry that the buyer doesn’t have enough capital to cover closing costs. They may also worry that the buyer may back out if costs begin adding up. Moving on to the appraisal process, VA appraisals can be more strict compared to conventional appraisals. The result can be an undervalued home or buyer counters for costly repairs. If a home does not appraise for the purchase price, this can create challenges with the loan, especially a VA loan. It may require the buyer to increase or commit to a down payment. Lastly, VA loans can have longer closing times compared to conventional loans.
Emotional Hurdles
The home buying process can come with emotional hurdles such as some homes being out of reach or rejected offers. Veterans and servicemembers may suffer from PTSD. A rejected offer or struggle to find the right home may surface some of the side effects of PTSD. Working with an agent that is patient and supportive, and one you’re comfortable sharing what you’re truly going through with can help you endure the home buying process. Despite the possibility of striking out, keep chasing your dream of home ownership. Remember that while emotional, the home buying process is a business transaction based on facts and numbers.
Tips for Navigating the VA Loan Process
Work with an Experienced Agent
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Working with an experienced agent you trust can make all the difference in purchasing your dream home. From finding the right home for the right price to feeling truly supported every step of the way, an experienced agent is on your team. Even before obtaining approval, choose the right agent, and they will bring all the best resources to you. Potential buyers uncertain if it’s the right time should still start conversations with an experienced agent. While an agent may help you on a transactional basis, a good agent will establish a long-standing relationship and be your go-to for creating wealth through homeownership over the years.
Understand the Process
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An experienced agent will aid in a seamless process and ensure you’re prepared every step of the way. Despite the trust you have in your agent, it’s important to ask questions and ensure you understand the details of the transaction.
Advocate for Yourself
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Purchasing a home can be an emotional process, but there’s a big financial decision at hand. From only committing when you find the right home, to negotiating a deal that works for you, speak up to your agent so they can advocate for you on your behalf. You may not know the right solution, afterall that’s their job, but be open in expressing your concerns and needs so they can truly work for you.
Making VA Loans Work for You in San Francisco
If you’ve considered using a VA home loan in San Francisco, it’s worth your time to explore the option in detail. Whether you decide you’re ready to buy now, or at the least ready to start the search, or decide that a later date is better, the more you know, the better. Researching on the internet is a great way to access valuable information, but one-on-one personalized advice can put you in the driver's seat headed toward making a VA home loan in San Francisco work for you.
Daydreaming about owning your own home in a city you love? Contact Darlene Perry to turn the dream into a reality!
