There are plenty of great military benefits for active duty and veterans alike, but there’s only one that can directly help you achieve the American Dream. Now, the specifics that make up every individual’s concept of the American Dream are as varied as the people that make up our great country. But it’s a safe bet to assume that a pretty universal pillar of that dream is ownership of one’s very own home. A “dream house,” as the relevant cliche goes. And with the help of a VA Home Loan, you can make that goal a reality more easily than you might expect.
What is a VA Loan?
Contrary to some conceptions, this is not a loan provided by the United States Department of Veterans Affairs. VA Loans are issued by the same sort of private lenders who issue regular home loans, such as banks and mortgage brokers. These loans are, however, partially guaranteed by the VA. And having at least some of the payment guaranteed by a government agency allows the actual lender to offer more favorable terms than they could to a person without that sort of financial safety net.
Who is Eligible for a VA Loan
The standard VA Loan is available to pretty much every member of the wider military community. There’s not even a minimum credit score required to qualify. All veterans and currently serving personnel are eligible for a loan so long as they meet the following criteria:
- If discharged, it must have been under any circumstances other than dishonorable.
- For active duty or veterans of the active military, they must have served a minimum of 90 days in wartime or 181 days in peacetime.
- For current or former reservists and National Guard personnel, they must have served a minimum of six credible years and received an honorable discharge or retirement.
- All time in service requirements are waived for individuals discharged for service connected disabilities or medically retired.
Military Spouse Eligibility
Some military spouses are also eligible for a VA Loan, though they must fall under several very specific categories:
- Spouses of personnel who died in service or from a service connected disability and have not remarried before age 57.
- Spouses of prisoners of war or those listed as missing in action.
- Spouses receiving Dependency and Indemnity Compensation (DIC) benefits even if the veteran’s death was not service connected.
- Spouses of 100% disabled veterans whose death was not service connected.
And, beyond that, a select few people outside the traditional US military/veteran community may also be eligible, including:
- American citizens who served in the military of an allied nation during WWII.
- Those who served spent time as cadets or midshipmen at one or more of the US military’s service academies but not go on to active service.
- Officers of the non-military Uniformed Services of the United States (the Public Health Service and National Oceanographic and Atmospheric Administration).
- Sailors of the Merchant Marine who served in WWII.
If you’re curious or unsure about your individual eligibility, contact the VA’s Home Loan Service Department and they’ll help you sort it out.
How Does the VA Loan Process Work?
The short answer is that it works much like getting a regular home loan with a few extra steps. And don’t worry, we’ll go through those in detail below. But the first thing you need to do is find a lender, be it a mortgage company or a bank, that you want to get your VA Home Loan through. This will probably take you a little bit of time, especially if you want to make sure you get the best possible rate from the most optimal provider. Some comprehensive online research is definitely worthwhile.
Some good, handy places to start are Nerdwallet’s rundown of top VA mortgage lenders and Bankrate’s easy-to-use VA Loan calculator. If you already bank with a notable veteran-friendly establishment, like USAA, you should check with them and see what they can offer you in terms of a VA home loan. That way you know you’re working with a lender you already trust, which may matter to you even more than simply getting the best bargain.
VA Loan Benefits vs. Regular Home Loan
We mentioned above that the VA’s partial backing of any loan taken out through the VA Loan program means more favorable terms for you, the potential homeowner. The specific upsides of your particular VA Loan over a standard one will no doubt vary, but here are some of the general comparative benefits you can typically look forward to:
- Lower than average rates set by your lender.
- No required down payment and lower than average closing costs.
- Lenders are likely to be more flexible about credit requirements.
- Previous bankruptcy doesn’t preclude you from having one.
- The VA will assist you in all future complications and disputes with your loan and the home it covers.
How to Get a VA Loan
Now, with a deal this good and that list of stipulations we went through, you might expect this to be a real headache of a process. Don’t fret, because it’s actually pretty straightforward. Here’s an outline of the steps to securing a VA Loan for your home once you’ve determined your eligibility:
- Apply for your Certificate of Eligibility (COE) with whichever documents are required based on your service and status (that link has a full chart of exactly what paperwork you need depending on which eligibility category you fall into). This document proves to whatever lender you chose that you are entitled to a VA Home Loan. The process can be done online through your ebenefits account, by mail, or through your lender if you’ve already picked one.
- Find and select a lender. Do your research and be sure the lender you pick has a solid reputation. A quick internet search will show that pretty much every bank or mortgage lender, big or small, local or national, offers VA Loans. After all, they are partially guaranteed by the government which makes them just as good for them as it is for you. Be advised, however: as we said before, there is no minimum credit score to receive a COE. But most lenders, just as a rule, won’t offer any loan to someone with bad credit. In general, 580 is about as low a score as most lenders will accept.
- Sign the purchase agreement on your home. This, of course, assumes you’ve already gone through the long (and often stressful) process of actually finding the home you want to purchase. And if you’re still hunting for quality military homes at this point, AHRN may have what you’re looking for.
- Officially apply for your VA loan. With your COE and signed purchase agreement in hand, you and your lender can now formally apply for a VA Home Loan. Provided everything’s in order, this should be fairly fast and easy.
- Close on the property and move on it. Start unpacking and get cozy in your beautiful new home.
Types of VA Loan Programs
Everything we’ve covered here falls under the standard variety of VA Loan aimed at the purchase of a home under fairly regular circumstances. But there are a few other programs offered by the Department of Veterans that may be more in line with your particular needs.
Cash-Out Refinance Loans
Often referred to as a “cash-out refi” by those in the real estate biz, this allows you to refinance your first mortgage on a currently-owned home.
Interest Rate Reduction Refinance Loans
An IRRRL can only be applied to a home you already have a VA Loan on and is typically utilized when you need to lower your monthly payment and/or interest rate.
Native American Direct Loan Program
The NADL Program provides highly advantageous home loans to qualifying Native American veterans. If you fit one or more of the aforementioned eligibility criteria and are Native American, you’re eligible for this as well.
Adapted Housing Grants
A variety of offers tailored towards veterans with permanent disabilities that require specially adapted housing. These provide options for people who wish to purchase a new home that meets their needs, build one, or alter a currently owned one as necessary.
Whatever your service history, situation, or idea of a dream home (indoor/outdoor pool with waterslide, right?) a VA Loan can help make it yours. It’s a great program and a well-deserved benefit for all who qualify. After all, you spent part of your life in the service of the United States of America. You deserve your piece of the American Dream.
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