If you want to buy, build, retain, or improve a home, as a Service member, Veteran or their surviving spouse, Reservist or National Guard member, you may be able to get a VA-backed home loan. By guaranteeing a portion of the loan you seek through mortgage companies and banks, the VA can help you attain better rates. AHRN.com has put together this overview to give you a basic snapshot of the process to get you started.
How do you qualify? The answer is specific to each category of person. While detailed information can be found on the US Department of Veterans Affairs website, we’ve worked with Army Reservist Grant Moon to bring you the basics.
To be eligible for a VA loan, three things are needed:
1. A Good Credit Rating
A few points can make a big difference in getting you a better loan rate, which can mean savings in the thousands of dollars. You can improve your credit score, but it takes some work to show an increase. There’s no time like the present to get started. By law, each year you can get a free copy of all three credit bureaus records – Equifax, Experian and TransUnion – through AnnualCreditReport.com. The website has several articles on how to improve your scores as well. The basics are:
- Look for mistakes, and dispute any errors with the bureau, which has 30 days to remove them.
- If you can, pay down your credit card debt, as this weighs most heavily on your score than other debts like auto or student loans.
- Your bill paying track record makes up 35% of your score, so not paying them on time, even once or twice, can really affect your number. Give a call to each creditor and ask if they will do a forgiveness removal of late payment info (referred to as a goodwill deletion). It’s more likely to happen if your late payment is the exception, not the rule in your history.
Once you’ve done the above, it’s critical that you pay every single bill on time or early from then on, as you work toward getting a loan.
Beware! Do not close old credit card accounts down, at least not while going for a loan. While you think it would help to streamline, actually it can hurt, as 15% of your score is based on the longevity of your accounts.
2. Enough Income
Your mortgage payment should be roughly 25% of your income, and not more. Don’t forget that there will be closing and moving costs and some basics like paint and carpet, let alone new furniture. If you’re doing repairs, improvements or adaptations to your home, it helps to pad your estimated costs, as construction often takes longer and costs more than you plan for. Naturally, the steadier your income the better, to justify regular repayment of the loan.
3. Certificate of Eligibility (COE)
This eligibility certificate tells your lender that you are a ready candidate for a VA-backed loan. To get your COE, you must have been discharged for reasons other than dishonor, and meet certain service requirements. Consult the chart provided by the US Department of Veterans Affairs to determine where you may land.
If you do not meet the minimum service requirements, you may still be eligible if you were discharged due to (1) hardship, (2) the convenience of the government, (3) reduction-in-force, (4) certain medical conditions, or (5) a service-connected disability.
Once you identify that your status requirements are met, you can then locate your category for the requirements, which tells you which forms are needed for each. The US Department of VA Benefits site outlines the different categories and relevant requirements.
Spouses can find more about special circumstances for them on the US Department of Veteran’s Affairs’ website’s Home Loan page.
After gathering all you need, you can apply for a COE online through the E-benefits portal, by mail or
through your own lender, most of whom have the Web LGY system. If you have sufficient data on the VA system, the bank can often use the LGY app to get your eligibility and give you your COE in the click of a key.
Before or while this process is going on, it is wise to speak to several lenders that offer competitive rates and good terms knowing that you will be participating in the VA loan program, until you find one that suits your needs.
VA loans can help with more than buying a house or condo, whether you are adapting an existing home, need a loan on Native American Veteran’s Federal trust land or for a farm, looking to obtain mortgage life insurance or need assistance with delinquent loans. Look under the Home Loans category on the Veterans Benefits Administration Fact Sheets page for clear information on all of the above.
The pages we linked above are a great resource – talk to others, read articles, and watch some of the videos offered by the VA to further educate yourself. Need some help navigating your VA Loan options? Visit VA Loan Captain – your trusted source for VA loan assistance!
Meet Your Contributor:
Rochelle Joseph is a Writer and Image Consultant who has had experience marketing, renting and buying/selling her properties for over 20 years. She has written and edited for several publications, including the Boston Book Review, The Emerson Review, ZooBorns.com, WildLife Magazine, the Houston Zoo, The Wildlife Center of Texas, One Spirit Interfaith Seminary as well as AHRN.com. She currently writes at her great gifts blog at http://lookyhereu.blogspot.com and her animal blog at http://naturegirrrl.blogspot.com.