What are Veterans Loans?
Veterans loans, or Veterans Affairs (VA) loans, are a special kind of home loan or mortgage offered by the Department of Veterans Affairs to veterans, service members and their families. They are specific to serving and ex-military members in the United States.
Veterans loans are government-backed against default but are granted by private lenders and banks. Although eligibility criteria may vary, every veteran, service member and military family can apply. The VA stands in the place of a guarantor for qualified veterans by providing them with a certificate of Eligibility. Keep reading as we explore veteran loan qualifications and how to apply for one.
How to Qualify for a Veterans Loan
The veterans loans offered by the VA work just like regular home loans and mortgages but with significant benefits to veterans and their immediate families. These benefits often differ from one private lender or bank to another due to competition.
No matter how much the home costs, a down payment is not required when taking out a veteran loan. The only exception is when the purchasing price far exceeds the property value. Here are the major ways to qualify for a Veterans loan:
- Service members. A person still in active service must have completed at least 90 days of active duty during wartime or 180 days during peacetime to qualify for a veterans loan.
- Veterans. Service requirements for veterans vary depending on the period or year of service. On average, veterans must have served a minimum of 181 days on active duty during their service years unless they were discharged due to a service-connected disability or served during wartime.
- National Guard members. Depending on the period of service, the minimum service requirement is: 90 days of non-training active duty, 90 days of active duty, or 6 creditable years in the National Guard, and an honorable discharge or appearance on the retirement list.
- Reserve members. Reserve members who served during the Gulf War must have served for at least 90 active duty days. Service during any other period requires a minimum of: 90 days of non-training active duty, or 6 creditable years in the National Guard, and an honorable discharge, an appearance on the retirement list or continued service in the Selected Reserve.
- Spouses. The spouses of veterans who died on active duty, died as a result of a service-connected disability, went missing in action or were taken as prisoners of war qualify for a veterans loan unless they choose to remarry before the age of 57.
How to Get Veterans Loans
If you don't know how easy it is to get veteran loans, you might be quick to dismiss the idea of applying for it. Here are six easy steps to take to get veteran loans:
- Get your Certificate of Eligibility (COE). The VA issues a Certificate of Eligibility to veterans or their spouses who meet the eligibility requirements above.
- Find a lender. This step is a little tricky as not all lenders are VA-approved. To enjoy the benefits associated with veterans loans, you must first find a lender approved by the Department of Veterans Affairs.
- Get pre-approved for your loan. During this step, your lender will consider your finances, employment situation and service history to ascertain how much you can borrow. You might be required to submit documents during this phase.
- Find your home and get a VA appraisal. After finding the home of your choice and negotiating an agreement, your lender will order a VA appraisal. A third-party appraiser will assess the property to ensure that it meets the VA minimum property requirements.
- Complete the underwriting process. Additional documentation will be demanded by your lender to further evaluate your eligibility. When this process is done, you will be cleared to close by your lender.
- Close your loan. This step requires you to sign documents that affirm that you understand and agree with the terms of your loan. After signing, you will receive the keys to your new house.
What Can You Use Veterans Loans For?
Qualified veterans can buy a house with the help of veterans loans without a down payment. Veterans loans also refinance existing mortgages allowing the borrower to obtain equity through a withdrawal refinance.
It is worth noting that the interest rates that come with veteran loans are often better than regular loans. This is due to the competitive nature of these loans. There is also no prepayment penalty if a veteran decides to pay off their mortgage early.
Final Notes
Veterans loans are one of the best ways to better manage your budget. They afford you the flexibility of getting the home of your choice without a down payment. Understanding how they work gets you a step closer to financial liberation and making the most of your finances