For military families, the VA loan program is a fantastic resource that offers numerous home-buying benefits for Veterans, active-duty service members, and their eligible family members. In recent years, the VA loan has become more popular for military families, with over 1 million VA loans guarantee annually, at an average of $310,000 per loan.
In this comprehensive guide, we’ll walk you through everything you need to know about VA loans, from eligibility requirements to the advantages they offer, and the few situations where you cannot get a VA loan.
Who is Eligible to Use the VA Loan?
First, let’s clarify who is eligible to use this unique mortgage program. The VA loan program is primarily designed for active-duty service members, Veterans, and surviving spouses.
Eligibility is determined based on the length of time served, and the time period of service. For example, Veterans from the 1990s to the present must have either served 24 continuous months, or 90 days of they were medically discharged. However, Vietnam-era Veterans only need to have served for 90 days to qualify. National Guard members must have been activited for 90 continuous days to be eligible.
These VA loan benefits do not have an expiration date, so even if a service member served many years ago, they can still access the VA loan program. And military spouses of a deceased service member can be eligible as well. You can request a Certificate of Eligibility (CoE) online from Veterans’ Affairs to begin your VA loan process.
6 Key Advantages of the VA loan
A VA loan offers several great benefits designed to make homeownership more accessible to military families. It is not the only mortgage possibility for military families buying a home, but it is an option every military family should consider.
1. No Down Payment Required
One of the most attractive features of VA loans is that they do not require a down payment. In the traditional mortgage world, lenders typically expect a substantial down payment, often around 20% of the home’s purchase price. For military families, this means that they can purchase a home without the burden of saving up for a significant down payment. This allows them to move into their new home sooner.
2. No Private Mortgage Insurance (PMI) Requirement
Another significant advantage of VA loans is that they do not require Private Mortgage Insurance (PMI). PMI is a monthly insurance premium that borrowers with conventional loans must pay when they have less than a 20% down payment. By eliminating the need for PMI, VA loans can save military families hundreds of dollars every month. This makes homeownership more affordable, which is especially important when you are trying to match your monthly payment to your BAH (Basic Allowance for Housing) rate.
3. Lower Interest Rates
VA loans often come with lower interest rates compared to conventional mortgages. Lenders offer these competitive rates because the VA guarantees a portion of the loan, reducing the lender’s risk. A lower interest rate means lower monthly payments, which can make a substantial difference in the long run. Lower interest rates can save military families thousands of dollars over the life of the loan. Mortgage rates change weekly, so always talk to your lender about your options and compare different loan rates.
4. Lower Credit Requirements
VA loans are known for their lenient credit requirements. While conventional loans often demand a high credit score to qualify, VA loans are more forgiving. This flexibility makes homeownership more accessible for military families, even if they have had credit challenges in the past. You can learn more in this article about the importance of your credit score when buying a home.
5. You Can Use the VA Loan More Than Once
Contrary to a common misconception, the VA loan program is not a one-time benefit. Eligible individuals can use the VA loan multiple times throughout their lives. Whether you’re buying your first home, relocating to a new duty station, or upgrading to a larger house to accommodate a growing family, the VA loan can be a valuable tool for every stage of your homeownership journey.
6. The VA Loan Comes from Local Lenders, Not the VA
It’s important to understand that the VA loan program is not issued directly by the Department of Veterans Affairs (VA). Instead, VA loans are offered by private lenders, such as banks, credit unions, and mortgage companies. The VA plays a crucial role by guaranteeing a portion of the loan, which reduces the lender’s risk and allows them to offer favorable terms to military borrowers. This means you have choices and can shop around for a mortgage broker when using the VA loan.
Situations When Military Families Cannot Use a VA Loan
While the VA loan program offers numerous advantages, there are specific situations in which military families cannot use a VA loan for a home purchase. It’s important to be aware of these limitations.
Rental or Vacation Properties:
VA loans are intended for primary residences only. You cannot use a VA loan to purchase a property with the sole purpose of renting it out. However, you can use a VA loan to buy a multi-unit property, such as a duplex or triplex, as long as you intend to live in one of the units.
Similar to rental properties, VA loans are not approved for investment properties. If your primary goal is to purchase a property for investment purposes and not as your primary residence, a VA loan is not the right option. If you want to rent out your home after you get PCS orders, you will need to live in the home as your primary residence first.
A Home in Poor Condition:
VA loans have minimum property requirements to ensure the home is safe and habitable. If the property is in poor condition or requires significant repairs, it may not meet these requirements, making it ineligible for a VA loan. If you’re interested in real estate “flipping” projects, the VA loan is not a good fit.
A Home Worth More Than Your Approval:
VA loans have maximum loan limits that vary by location. If the home you wish to purchase exceeds these limits, you may need to cover the difference with a down payment or explore other financing options. In a competitive housing market (like we have seen since 2020), this type of offer is less desirable to sellers.
VA Loan Resources for Military Families
The VA loan program is a fantastic resource for military families looking to achieve the dream of homeownership. With its no down payment requirement, exemption from PMI, lower interest rates, lenient credit requirements, and the ability to use the loan more than once, VA loans offer a multitude of benefits.
It’s crucial for military families to understand their eligibility and the limitations of the program to make informed decisions when navigating the housing market. By taking advantage of the VA loan program, military families can secure affordable and stable housing for themselves and their loved ones.
Want to learn more essential facts about applying for a VA Loan? Download our free Loan Guide here!
If you’re a military home-buyer, you will find numerous free tools, articles, and interactive courses on The Edge, which is GoVA’s free platform to empower military families financially. Learn about loan options, use a mortgage calculator, and get savvy about your military benefits. It’s all on The Edge, all free for our military members. Sign up for a free Edge membership today!