7 Home-Buying Tips Every Veteran Needs to Know

Buying a home is an exciting milestone in any person’s life. This can be especially true for veterans, who have likely spent years traveling between bases, and are looking for a place to finally call their own.

While buying a home can be overwhelming and costly, there are many resources available to make the process easier and more affordable for those who have served their country. If you’re a veteran or active military personnel starting the quest for your new home, be sure to first consider these seven important home-buying tips.

1. Understand the VA home loan

Most veterans are eligible for a VA home loan, which is provided by a private lender but backed by the U.S. Department of Veterans Affairs. A mortgage that requires $0 down, VA loans boast a competitive and affordable way for veterans laying down roots to save. Credit requirements are looser than traditional mortgages as well – a bonus for those who don’t have a long credit history. Further, VA loans don’t require private mortgage insurance (PMI) – a typical form of insurance for those who can’t put down 20%. Before moving forward, be sure to review the loan requirements and ensure you’re eligible.

“Like any homebuyer, veterans eligible for the VA home loan program should shop around to different lenders to find the best mortgage for their needs,” said Redfin chief economist Daryl Fairweather.

In the past, there have been caps on the size of VA loans offered. However, starting Jan. 1, 2020, a new law will eliminate VA loan limits, allowing veterans to buy higher-value homes. Additionally, funding fees are required with VA loans, which are not generally a component in standard mortgages. However, these are charged for a good purpose. They go directly to the Department of Veterans Affairs to pay the costs of the program. In 2020, the funding fee will be 2.3% of the total loan amount for the first use and 3.6% for subsequent uses. You can pay for this fee upfront or roll it into the loan.

Learning the basics of a VA home loan and how to properly use your military benefits are just small pieces of the mortgage process. To better understand how to maximize the use of your benefits, speak with a qualified mortgage lender to discuss what works best for you.

2. Explore all of your lending options

VA loans are great for qualifying veterans who want a loan with no down payment and fewer closing costs. However, there may be instances where using other loan options are a better fit. Some of these options include:

• FHA loan: Like VA loans, an FHA loan allows veterans to buy a home without the need for great credit and a large down payment. While FHA loans offer some cost-saving benefits, they generally can’t match the advantages of a VA loan. However, if you have a credit score in the 500s, you likely won’t qualify for a VA loan. In this case, an FHA loan is a great option.
• USDA loan: If you’re looking to buy a home in a suburban or rural area, you may qualify for a zero-down loan backed by the U.S. Department of Agriculture. USDA home loans encourage homeownership in non-urban areas of the U.S. and allow borrowers to enter mortgages with no down payment as long as the property is within a qualified area. If you qualify as low- to moderate-income and can’t qualify for VA loan, consider a USDA loan instead.
• Conventional loan: These are the most common type of home mortgages for the general public. Unlike an FHA or a VA loan, conventional loans don’t come with any government backing. Credit requirements and financial standards for conventional loans tend to be more restrictive. However, those with excellent credit and stable assets can often get great rates and terms.
• Native American Direct Loan: This program is specifically for qualifying Native service members to use VA loan benefits for housing on federal trust lands. Veterans who are not Native American, but who have a Native American non-military spouse, may also be eligible for a loan under this program. Unlike the traditional VA loan, NADLs come straight from the government and don’t involve a third-party lender.

3. Focus on credit

VA loans have looser credit requirements than traditional mortgages, but this doesn’t mean that credit is ignored entirely. Homebuyers do need a credit history of some sort with more positive than negative indicators. Check your score regularly to ensure your current actions are building and not hurting your credit. You can get one free copy of your credit report every 12 months at AnnualCreditReport.com.

4. Look into other financial resources

There are a number of other home-buying grants and programs offering financial resources to veterans, including:

• Dream Makers Homebuying Assistance: This program provides matching grants for down payments and closing cost assistance for qualified veterans and active duty service members with low- to moderate-income. The Dream Makers grant is based on a 2-to-1 match of what the homebuyer contributes towards the purchase. The grant has a maximum of $5,000.
• Adapted Housing Grants: These grants can help veterans with permanent and total service-connected disabilities purchase or build an adapted home. You can also use them to modify an existing home to accommodate their disability.
• There are also numerous state and local programs that provide housing grants for veterans in their area. For example, the Utah Veteran First-time Homebuyer Grant gifts $2,500 to veterans and those currently serving who purchase their first home in Utah. Once you know the location of your new home, you can also check the VA’s National Resource Directory for more location-specific housing assistance.

5. Keep your job

Stability, employment, and income are important parts of qualifying for any mortgage, including a VA loan. So, if possible, keep your employment consistent throughout the home-buying process. Quitting your stable job, even if you have another one lined up, raises red flags for lenders of all kinds. This implies that your income may not be on par with the terms upon which your loan offer was made.

Even if you signed the paperwork, your loan isn’t guaranteed until the closing process is complete. So if you change jobs during any part of the process, your loan eligibility could be withdrawn. This also goes for big purchases. You should, of course, still make necessary purchases, but anything extraneous and large that can wait, should.

6. Don’t forget about closing costs

A great benefit of  VA home loans is that the VA prohibits veterans from paying certain closing costs. You won’t need to pay fees for document preparation, escrow, underwriting, and processing. Additional non-allowable closing costs include prepayment penalties, tax service fees, and broker fees. However, there are some costs that veterans are responsible for. These can include:

• Appraisal
• Credit report
• Title insurance
• Origination fee
• Recording fee
• Survey fee
• Discount points (to lower your interest rate)

“If you plan to stay in the home for many years, you may want to minimize how much interest you will pay over the course of the loan. If you plan to move after a couple of years, you may want to focus more on minimizing your cost at closing,” said Fairweather.

Your lender should provide you with a loan estimate, which outlines the exact fees you need to pay at closing. You can also negotiate these costs, and the seller may be persuaded to pay for some of them.

7. Use the right real estate agent

If you plan to take advantage of veteran home-buying programs, choose a realtor who is experienced with veterans. The differences between VA loans and other mortgage options can be vast, so working with a professional who fully understands the buying process for veterans is highly recommended.

Consider searching through online directories to find veteran-friendly agents or speaking with other veterans who have made successful purchases in your housing market. If you feel that your agent can’t properly guide you through the process, don’t be afraid to make a switch at any time.

Buying a house as a veteran can be a major decision, especially for those newly out of the service. However, the right information and preparation can make the process significantly easier. From reviewing all of your lending options to understanding closing costs, these seven veteran home-buying tips can make the exciting process of homeownership as seamless as possible.

This post first appeared on Redfin.com. To see the original, click here.