Buying a House With a VA Loan
(Photo : Pixabay)


The average home loan in The United States currently stands at over $370,000, and this figure is growing each year. As house prices increase, so do home loans, and with a higher loan amount comes larger down payments. These costs can be too high for the average person, with most banks and lenders requesting the buyers puts 20% down. That's an eyewatering $74,000 downpayment on $370,000, but what if you live in a costly state or city where homes cost more?

If you get lucky, you may be able to pay less than 20% upfront. The catch? In doing so, you will need to take out mortgage insurance. Insurance costs around 1% of the loan amount per year, another pretty sizeable annual expense. This is why buying a home is considered a luxury in The US. The costs involved make it unattainable for the average family, leaving many of us stuck in the trap of renting.

This isn't fair for the average hard-working American, but it would be nothing short of injustice for the military or veterans. This is where the VA home loan comes in, designed to help those serving or who have served their country. Keep reading to learn more about the VA loan scheme, who is eligible, and how it works.

What is a VA Home Loan?

A VA home loan is guaranteed by the United States Department of Veteran Affairs. As a way of paying a little back to our servicemen and women, the VA home loan gives lenders extra peace of mind. This means that borrowers can get more favorable terms, including the most significant benefit of the scheme; a $0 downpayment.

The process doesn't differ much from the standard home loan application when applying for a VA mortgage. The Department of Veteran Affairs doesn't provide any capital, and banks and mortgage companies still issue the funds. You will still be required to submit financial information, including credit history, income, and outgoings. Once pre-approved for a VA loan, it's time to go looking for your new home.

Who Is Eligible For A VA Loan?

To qualify for a VA home loan, you need to meet specific criteria. First and foremost, the scheme is only available to those serving in the military or have done so in the past. There are some specifics to this, and you must meet one or more of the following criteria:


●     Actively serving for 90 consecutive days in the military during wartime

●     Actively serving for 180 days during peacetime

●     Serving six or more years in the National Guard or Reserves

●     You are the widow or widower of a service member that died in the line of duty or as a result of an injury after service

The criteria for a VA loan are pretty straightforward, and it should be immediately apparent from the eligibility list whether or not you can be a recipient of the benefit. The process begins with prequalification, which should result in preapproval. Even those with foreclosures or bankruptcy could be eligible for the scheme in the Government's bid to help every veteran despite past financial troubles.

Some grey areas and caveats could mean that you're still eligible even if you don't fit the exact criteria. Therefore, it is recommended that you talk directly to the United States Department of Veteran Affairs or a VA home loan specialist to discuss your case.

How a VA Loan Can Help With Buying a House

As we've already mentioned, the VA home loan often means that there is a $0 downpayment on your new home. This makes owning a home a reality for those that will never have access to the lump sum of cash required for a standard mortgage. Although this is the highlight of the scheme, there are many other benefits to a VA loan. Including:

●     No private mortgage insurance is required with a VA loan, which is a considerable cost saving

●     You will receive competitive interest rates, often lower than standard mortgages

●     It's a lifetime benefit so that you can use the VA loan service more than once

●     Lower closing and completion costs upon buying

So, What Does it Cost?


The specifics of your mortgage will depend entirely on the property you buy and the interest rates. Using a mortgage calculator like What's My Payment can help you work out precisely what you will be spending monthly. For example, a VA loan on a property valued at $370,000 would cost you $1,650 per month at 3.25% interest and no deposit.

A VA Home Loan doesn't just help bring your monthly payments down, but also the initial and closing fees. This can result in saving thousands of dollars, making the entire process more accessible and significantly cheaper.

A Few Rules Worth Noting

Although there are no down payments required on your loan, you will need to pay a VA funding fee. The VA funding fee is 2.3% of the loan amount and is due on closing. It's a small price to pay for the service and significantly cheaper than the alternatives.

The VA home loan is not to be used for investment purposes or buy-to-let properties. Because of this, the recipient of the loan needs to be an occupant at the home they are purchasing. Only certain types of homes will be eligible, and the loan is primarily designed for ready to move into homes. Fixer-uppers or projects are unlikely to get VA loan approval.

Although it's a lifetime benefit, you can only have one VA home loan at any one time. This means that you will need to sell your property or pay off your mortgage early to apply for a new VA loan, which can incur fees.

Despite these specific rules, the VA loan scheme is a fantastic option for veterans. Thanks to VA loans, millions of homeowners on the property ladder, many of whom would struggle to buy a property without the benefit.