If you are a veteran or surviving spouse, you may have already heard about the home loan program offered through the U.S. Department of Veteran Affairs (VA), and it most likely sounds appealing to you. Obviously, the idea of a $0 down payment home loan is most certainly appealing, but it’s normal for most veterans also have a lot of questions surrounding the program.
What exactly in the VA program? How does it work, and who is eligible? How can you get started on finding your dream home, without the costly barrier of making a down payment? In our handy guide, we will answer all these questions, and help you get on the right track towards buying the perfect home for you and your family.
About the VA Home Loan Program
VA home loans can be used to purchase, refinance, improve or even build homes. They are insured through the VA but offered through many mainstream lenders. This means that VA home loans are not available directly through the VA, as many people might assume. Instead, this program allows veterans to take advantage of the same private home loans as civilians, with a few distinctive perks.
Some of the strongest benefits about this program include:
- It’s availability to veterans who have low credit scores
- Lowinterest rates
- Low closing costs
- No mortgage insurance
- Higher debt-to-income ratios are typically accepted
- Over 90% of VA home loans require no down payments
The last benefit is undoubtedly one of the more well-known and discussed aspects of the program. Down payments can certainly be a barrier for certain homeowners, and with a VA home loan, you can begin building equity and owning your own property without months of saving and uncertainty.
What Happens if I Cannot Make Payments?
Having a $0 down payment home loan can help veterans and their families afford to own, build or improve their homes. However, this does not mean that it is impossible to run into financial difficulties, even with the added benefits of a VA home loan.
If, after receiving a home loan, you are struggling to make payments, the VA offers resources such as financial counseling to help you avoid foreclosure and design a repayment plan that works for you.
Ultimately, there are six ways you can work with your lender to prevent foreclosure:
- Developing a repayment plan, which often involves adding an extra amount to future mortgage payments to make for missed payments
- Special forbearance, a plan that grants homeowners an extended period to pay back missed payments
- Being granted a period of time to arrange a private sale, thereby allowing homeowners to sell before the home is lost to foreclosure
- Loan modification, which allows missed payments and related legal expenses to be added to your home loan, and then finding a new payment schedule that works with your needs
- Deed in lieu of foreclosure, which involves signing your deed over to your lender
- Short sale, which entails your lender accepting the total proceeds of a home sale as a full payment of all monies owed, even if it less than what you owe on your mortgage
With the assistance of a VA home loan technician, you can find an option that works best for you, and get assistance with self-advocacy, financial planning, and communications with your lender. To get in touch with a VA home loan technician today, you can call 1.877.827.3702.
Eligibility and Getting Started
Although not every veteran will qualify for a VA home loan, many will.
If you have been an active service member for a minimum of six months or have been in the reserves or National Guard for a minimum of six years, you have a very high chance of being approved. After being approved, you will receive a VA certificate of eligibility, which is a document you can show lenders to prove your status as an eligible veteran.
A basic overview of VA home loan requirements includes:
- Serving for 90 consecutive days during wartime
- Serving for 181 days during peacetime
- Having more than six years in the Reserves or the National Guard
- Service members with over 90 consecutive days of active service duty
In some circumstances, surviving spouses, even those who are not currently receiving Dependency and Indemnity Compensation (DIC), may also be eligible. As with many VA benefits, service members with dishonorable discharge will not be eligible for a VA home loan.
To get started on receiving your certificate of eligibility and your VA home loan, you can apply online using the VA eBenefits portal.
The documents you will need to receive your certificate of eligibility will vary depending on your applicant category. Commondocuments that are required include statements of service, annual retirement points statements, reports of service and records of separation, along with death certificates and marriage licenses for surviving spouses. It is best to gather the documents relevant to the category in which you are applying for before beginning the application process.
After you have received your certificate of eligibility, it is time for the next step: finding a lender. Many mainstream lenders, including major banks and credit unions, will offer VA home loans. The best way to ensure you find the right loan and lender for your needs is to do your due diligence.
It is okay to shop around and contact multiple lenders. One of the best and easiest places to find support is your current bank and credit union. If you are unsatisfied with their loan offers or are curious about other lenders, feel free to set up appointments. Come prepared with questions and concerns with you have and go over the terms and conditions of every loan before committing to anything.
Once you have finished your application process, found a lender that you wish to work with, the real fun part begins: finding your dream home!