One of the single biggest advantages of a VA loan is that qualified buyers can usually finance 100% of their primary home’s sale value.
10 TIPS EVERY MILITARY HOME BUYER SHOULD KNOW
For Active-Duty service members, Veterans and their families, buying a home is one of life’s most important investments and exciting adventures. You have unique housing needs and planning an “exit strategy” when it’s time to sell takes careful planning. While it’s true that homeownership is a great long-term financial move, you need to know what you’re getting yourself into. So with that in mind, let’s take a look at tips every VA buyer should know before beginning the journey to homeownership.
NO DOWN PAYMENT IS REQUIRED
NO DOWN PAYMENT DOESN'T MEAN $0 IS NEEDED TO BUY YOUR HOME.
While you aren’t required to have a down payment with a VA home loan, you will still need to plan ahead for closing costs and other out of pocket expenses (ie; home inspections and appraisal fees). The average home inspection cost for a property under 2,000 sq. ft. is $455 and appraisal costs range between $600 to $1,000.
FOCUS ON CREDIT
While purchasing a home in cash would be the homeownership's best-case scenario, for the vast majority of home buyers, the only way they’ll be able to meet their homeownership goals is by means of a mortgage.
In order to qualify for a mortgage, you must be able to prove your ability to repay your loan. To do so, you need to have a good credit rating, a stable job, a sizable amount of cash to make an initial down payment as well as a number of other requirements.
Out of all of those requirements, your credit score is one of the most important factors that lenders will consider when you apply for a mortgage.
That’s because all mortgages have a minimum credit score needed to qualify. And the higher your score, the better your terms will be.
For reference, according to TheLendersNetwork.com, the typical credit scores by mortgage type are:
FHA Loan - 580+
VA Loan - 620+
USDA Loan - 640 +
FHA 203K Loan - 620+
Conventional Loan - 620+
(Of course, these numbers could change depending on your area. Make sure to consult a trusted mortgage broker or mortgage agent to confirm the credit scores you need to have to qualify.)
Your first step towards improving your credit score is getting a credit report, so you know what your current score is (But be careful how many times you pull your score because checking your credit score too often can actually lower your credit score).
In the USA, you’re entitled to get a free copy of your credit each year from the 3 major credit reporting bureaus (Experian, TransUnion, and Equifax).
To get a free copy of your credit report, go to www.annualcreditreport.com. Although there are a number of websites that offer “free” credit reports, annual credit report.com is the only website authorized by the Federal Trade Commission to provide free credit reports.
As you go through your credit report, analyze it carefully and see if you can spot any mistakes. If you do, you’ll have the option to dispute those mistakes, which would improve your overall score.
At the same time, if you have a late payment or two, it’s possible to get them removed. Call the company that registered them, and ask them to remove those late payments.
If you only have one or two late payments, there probably won’t be any pushback, and the company will most likely remove them. But if you habitually make late payments, they likely won’t.
JOB GAPS COULD BE A PROBLEM
In order to qualify for traditional home loans, Lenders typically want to see that you’ve been at your current job for at least 2 years. If you have any job gaps, a VA-savvy Lender can take a closer look to determine options based on your particular situation.
MAINTAIN YOUR EMPLOYMENT
If job gaps aren’t a concern, let’s focus on maintaining stable employment throughout the home buying process. Your loan isn’t guaranteed until the closing process is complete, regardless of any paperwork you’ve already signed.
YOU CAN'T BORROW MORE MONEY
You can’t be approved for a loan amount higher than the appraised value of the property you’re purchasing; however, you can bring extra money to the table to cover gaps, if any, between the agreed upon purchase price and property's appraised value.
EXPLORE ALL OF YOUR LENDING OPTIONS
VA home loans are great for those who are looking for a loan with no down payment and limited closing costs, but there might be benefits to using other loan options. Some examples of these include FHA, USDA and conventional loans.
CONTINGENCIES ARE KEY FOR YOUR PROTECTION
When drafting your offer, it’s important that your assets are protected. Addendums can be incorporated to provide additional protections.
BE MINDFUL OF VA LOAN OCCUPANCY REQUIREMENTS
The VA home loan program has occupancy requirements, because it’s designed for primary residences. VA buyers are also generally required to occupy the property they purchase within 60 days of closing. This doesn’t mean you can’t purchase an investment property.
A VA HOME LOAN IS REUSABLE
Once you completely pay off a VA home loan, you regain your full VA eligibility and can reuse it for another VA home loan.
Homeownership is always an exciting prospect, especially as you get closer and closer towards making it happen.
But in order for your first home purchase to be successful, you have to make sure you understand what it entails, what to be wary off, and what you can actually afford.