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Your Battle Plan for Buying a Home With a VA Loan | Immovable

By on March 23, 2021 0

Barbara Marquand

If you served in the military, a mortgage backed by the U.S. Department of Veterans Affairs may allow you to access homeownership. VA loans don’t require a minimum down payment or mortgage insurance, and they often have lower interest rates than other mortgages.

“Using this VA loan is an opportunity to buy a piece of America and build wealth,” says Levi Rodgers, former Green Beret and owner/broker of Re/Max Military City in San Antonio.

But ask and use a VA loan involves steps that other mortgages don’t have, and not every salesperson or real estate agent knows about them. It’s important to be prepared and choose the right professionals to help you, especially in a competitive housing market.

Here are some tips that can make the process easier.

1. Obtain your certificate of eligibility

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Your VA Certificate of Eligibility is a document that shows you meet the military service or surviving spouse requirements to apply for a VA loan. You’ll need it for loan closing, so it’s a good idea to do it early on, says Navy Federal Credit Union vice president Kevin Parker.

You can request the certificate through the VA or ask a VA-approved lender to help you obtain it.

2. Compare Experienced VA Mortgage Lenders

Not all lenders offer VA loans, and of those that do, some focus more than others on working with military borrowers.

“If you want a good steak, you probably want to go to a good steakhouse,” Parker says. Likewise, if you want a VA loan, choose a lender that does a lot of VA loans.

The VA loan program has its own rules, so you want a lender who understands the requirements and can walk you through the process. Ask potential lenders if they have loan officers who specialize in working with military borrowers.

Another consideration when buying from a lender: see if your state has a homebuyer programs for the benefit of first-time buyers or veterans, says Rodgers.

Many public housing finance authorities combine low-interest mortgages, including VA loans, with closing cost and down payment assistance programs. Some states also offer homebuyer tax credits that you can use on your federal tax return. To take advantage of the programs, you must work with a participating lender; your state housing authority can provide a list.

You will want Get pre-approved for a loan before you start looking for a property. A pre-approval letter from a lender will indicate how much you can borrow and show sellers and their agents that you are financially qualified.

Apply with at least three VA-approved lenders. Once you have an address for the property you wish to purchase, a lender will provide you with a loan estimate, which outlines the terms, estimated monthly payment and closing costs, and annual percentage rate – your interest rate. interest, including fees. Compare loan estimates from different lenders to choose the best loan for you.

3. Decide how you will pay the loan fees

Like other mortgages, VA loans have closing costs, which are fees charged to cover services and expenses such as appraisal, inspection, title, and origination fees. Closing costs typically range from 2% to 5% of the loan amount and are detailed in the loan estimate.

Another cost is the VA financing fee, a one-time fee that most borrowers will pay, depending on the amount of the down payment and prior use of the VA loan benefit. The 2020 finance charge for a zero rate loan on a first VA loan is 2.3% of the loan amount.

Here are the options if you can’t pay these fees in advance:

  • Roll finance charges into the loan. This will increase your loan amount and your monthly payment, and it means you’ll pay interest on finance charges over the life of the loan.
  • Ask the seller to intervene. The VA allows the seller to contribute up to 4% of the loan amount to cover certain closing costs and VA financing costs. Keep in mind, however, that sellers are less likely to make concessions when the competition to buy homes is fierce.
  • Find out if your lender is willing to cover closing costs in exchange for paying you a higher interest rate. Understand that this will increase your monthly mortgage payment.
  • Request help with closing costs through a national home buying program for first-time or veteran buyers.

4. Prepare to bring cash to the table

Although VA loans do not require a down payment in most cases, you will still need money to buy a home. Here’s why:

Increase chances of approval

Lenders will review your cash savings to make sure you’re financially stable enough to weather any obstacles, such as unexpected expenses, after buying the home, says Anthony “TJ” Powell, executive vice president of AAFMAA Mortgage Services, a subsidiary of the United States Armed Forces Service Association. “A lender will want the applicant to show that they have the ability to to save money and don’t live paycheck to paycheck.”

Cover the deposit

You will need some down payment money when you make an offer on a home. The earnest money is a deposit that shows the seller that you are serious about buying the property. The money is applied to the purchase, returned to you at closing, or lost if you cancel the transaction without a valid reason. The deposit is generally around 1% to 3% of the loan amount, but can vary considerably depending on the market.

Pay moving and other expenses

You will need money for moving, home maintenance, furniture and other home ownership expenses. “Buying a new home is stressful for a buyer, and the financial stress will only add to an overwhelming feeling,” says Powell. “Having cash savings will reduce stress and make the home buying experience easier.”

5. Choose a Realtor with Experience Serving Military Clients

Since the VA loan process has special requirements, it’s important to work with a realtor who understands VA financing. A good agent will guide you through the process and can advocate on your behalf with sellers. For example, an experienced agent will understand the VA appraisal process and can direct you to homes that may meet the minimum VA property requirements.

An agent who has experience with military buyers will also understand your unique housing needs. Rodgers, who was wounded in action while serving with US Army Special Forces in Afghanistan, helps each of his buyers create an ‘exit plan’ to sell or rent the property if they need to move further late.

Interview a few agents and ask about their experience serving buyers using VA loans and any additional training they’ve had, such as the National Association of Realtors’ “Military Relocation Professional” certification. Don’t assume officers have VA loan expertise just because they’ve served in the military, Rodgers says.