Current and former military members gain skills in communication, leadership, and teamwork during their service. Besides these skills, other benefits include higher education financing, travel discounts, and Department of Veterans Affairs (VA) home loans.
The creation of VA Home loans came as part of the Servicemen’s Readjustment Act of 1944. This act was made into law in an effort by the U.S. Congress to assist Veterans returning from World War 2 by making homeownership more attainable for them. Since then, VA home loans have helped over 24 million veterans become homeowners.
VA loans have some of the best benefits out of any government-guaranteed loan, which is part of the reason these loans are considered the best by most experts. The most notable benefits of these loans are no down payment, lower monthly mortgage payments, no-prepayment penalties, and no mortgage insurance premiums.
Unfortunately, many veterans are not using their VA home loan benefits, the most prominent reasons being that they’re not sure said benefits exist, if they qualify, or how to go about using them.
Here, we go over six simple steps for eligible applicants to use their well-earned VA home loan benefits.
Step One: Meet Eligibility Requirements
When applying for VA home loans, the first step is to ensure that the applicant meets the eligibility requirements set by the VA. These include meeting military service, income, credit score, and property requirements as defined by the VA. However, determining property eligibility requirements is done afterward once the applicant finds a home they like.
Military Service Requirements
Most current and former members of the military already meet VA home loan eligibility requirements. However, for people who might not be sure, service eligibility requirements are:
- 90 consecutive days of active duty wartime service.
- 181 days of active duty peacetime service.
- Six years of service if a member of the National Guard and military reserves.
- Surviving spouses are also eligible, so long as their significant others passed away while on service or due to a service-related disability.
Income Requirements
Eligible applicants must have a steady income while also taking care of any outstanding debts and compensating factors. Acceptable income sources include:
- Full-time job income.
- Social security.
- Retirement/pension.
- VA disability income.
Some incomes have a two-year continuance requirement.
- Part-time job.
- 1099 income.
- Self-employment.
- Seasonal job income.
Incomes from child support and alimonies require a three-year continuance. Some incomes are not eligible for VA loans and these are GI bills, Basic Housing Allowance (BHA), unemployment, cash payment, and workers’ compensation.
Credit Score Requirements
The VA doesn’t have a specific credit score requirement; however, experts recommend that applicants have a credit score of 620. Lower credit scores might still qualify, but lenders will consider other things like lower scores like late payments, reported collections, and existing mortgages.
Step Two: Go Through Pre-Approval Process
Once the applicant meets eligibility requirements, they should apply for a Certificate of Eligibility (COE). This certificate will show the lender that the applicant meets all the requirements based on service history and duty status.
The next step will be to go through the pre-approval process. Here, the applicant will meet with a lender and get pre-approved for an amount and begin looking for a home. However, it is essential to note that the amount the applicant is pre-approved for is not final and that it might change once the information is confirmed.
Step Three: Find Representation
After the applicant gets a pre-approval letter and a COE, they will take the next step to find a realtor. The realtor’s job will be to represent the applicant and find them the best deal available for them. They will do this with information available for them from the COE and the pre-approval letter and find a home that the applicant wants and can afford.
Step Four: Find Eligible Property
Like all other eligibility requirements listed in step one, the property must be eligible for a VA home loan. Eligible properties include:
- Single Family Homes.
- Multi-Family Complexes up to four units.
- VA-approved Condos.
- Double-wide mobile homes on permanent foundations.
- Manufactured homes on a permanent foundation.
Eligible properties must have no health and safety issues or be in a flood hazard area without flood insurance. Ineligible properties are timeshares, cooperatives, or non-VA-approved condos.
Step Five: Perform a Property Appraisal
Applicants that meet all eligibility requirements, including property eligibility requirements, will have to go through a property appraisal which a third-party appraiser does. An appraisal on the property will require the appraiser to inspect the property and compare it with other places in the same market based on value, trends, and sales prices.
Real estate experts recommend that applicants hire an independent inspector to inspect the property and ensure that they meet all health and safety standards. The inspector, unlike the appraiser, will focus solely on the property, which would include the structure and electrical wiring, among other things.
Step Six: Signing Your Loan Documents
Eventually, after everything is done and all inspections are finished, the next step is to sign all final documents with an underwriter verifying their accuracy and validity. The underwriter will ensure that the applicant’s income, service, credit score, and property meet all eligibility requirements. Once all closing documents are signed, the applicant will become a homeowner.
Phil Georgiades is the CLS for VAHomeLoanCenters.org, a government-sponsored brokerage specializing in VA loans. Phil has 23 years of experience working in real estate professionally. For more information or to submit a VA loan application, call us at (877) 432-5626.
SOURCE VA Loan Centers
