Becoming a homeowner as a veteran is a big step. For years after getting out we end up renting over and over again as jobs change, ideas change, plans change etc. You can’t really prepare for the civilian world as easily as you could in the military.
At least this was the story for me. We all have different experiences. But I wanted to write the best guide to purchasing a home using the VA loan. At least as well as I could given my experience. I’ll be updating this as I continue with the process and talk with other mortgage lenders.
So You’ve Found A Few Homes You Like
The first step in the home buying process is to really figure out what you want. A lot of advice out there is based on what you can afford, distance to schools, hospitals, other towns, highways etc. But this is a home and probably a place you’ll call home for many years, so choose something that you feel you’ll be happy with. Take it to heart, if you don’t want to live in a neighborhood (like me) don’t choose a neighborhood. If you have children and an established family, you should take those things into consideration.
It helps to have a home that can easily be sold again. The typical 3 bedroom 2 bath floor plan is what many go by as the standard for newer families and young couples. Don’t let it deter you from your ideal property though. If you’re single, look for what you’ll be happy living in. Sometimes resale value can come from other aspects like home design, location and acreage.
The Certificate of Eligibility
To use your VA home loan you must attain your Certificate of Eligibility. Bar none. Usually you will want to pull this info before approaching a lender. You can access your Certificate of Eligibility online through eBenefits. Just log in and the option under “Manage Benefits” and you should have no problems.
IF you cannot access it, don’t worry. Go to a mortgage broker and start the pre-approval process. It’s pain free, requires a phone call or, at most, a face to face interview. But normally a phone call. They’ll ask you some questions about employment etc and run a credit report. Be sure to mention the VA Loan. Mortgage brokers have special access to pull this information on behalf of a veteran. In doing so, they can send you a copy of your Certificate of Eligibility (COE hereon) and your credit score.
The VA Loan For Home Buyers
Know that your COE will have whether or not you are required to pay a funding fee of your loan. In most cases, disabled veterans do not need to pay anything and are typically exempt but you will know what your status is as soon as you pull your record from eBenefits. 100% disabled veterans are exempt. The point of the funding fee is to reduce the stress on tax payers.
While the rates change, first time VA Loan users end up paying around 2.15% of their loan to contribute towards to cost of the purchase. Keep in mind, this is GREAT. Most home buyers have to put down 20% of their home purchase which can end up being $20,000-$30,000 or more. Don’t complain about 2%-3%, it’s not a bad deal!
Should You Use A Realtor?
If this is your first time buying a home, definitely use a realtor. Realtors are skilled in the process of buying a home and these days act as more of a consultant than a salesperson. Never be intimidated when finding a realtor. The best way is to ask your friends and family for an intro. Someone will know a realtor, that’s how many of them get business as it’s the best way to network; especially since it’s free.
Are You Pre-approved?
After talking with your mortgage lender you will know very soon if you are approved to start home buying. This is a pre-approval based on your income and credit score. This allows you to go out and start looking at homes based on a budget. It’s smart to start under the limits of your pre-approval that way you can leave some leverage in negotiation.
Once you make an offer and it’s accepted, then all of the paperwork is submitted for the real approval of the mortgage. Typically they need a few forms signed, pay stubs for a few months or other proof of consistent income.
As always cash is king. So the more you can bring to the table, the better. It will bring down your monthly payments, reduce the loan amount, or can be used when negotiating terms. For example, cash is a great tool when you want to bargain any outstanding repairs or possibly keep an appliance the sellers don’t want to depart with. Sometimes you can offer to split the closing costs in exchange for something of equal value.
You don’t always want to offer to pay closing costs, but sometimes it can be an option you need to keep open.
This guide is not written to be an entire walkthrough of the home buying process. Instead I want to do my best to dispel any myths associated with the VA Loan and how to actually purchase a home using it.