The ability to purchase a home for their family is one of the more valuable benefits afforded to military members in exchange for serving. Here’s a quick guide that every VA homebuyer can use to get started when the direction of the first step might not be clear.
Important Side Note: If reading isn’t your thing, there is no substitute for speaking with a VA approved lender. Lenders who make VA loans are trained to do so and can guide you through the process from start to finish. You can connect with a VA lender here or view VA lenders and loan rates by using our VA loan calculator. As a heads up, What's My Payment might be compensated by lenders appearing on our site.
The following are some frequently asked questions, and our tips for how to best navigate the VA loan process.
Do I need to have money saved even though VA loans do not require a down payment?
It’s true, VA loans do not require a down payment. However, down payments are not the only out of pocket expense you’re likely to encounter when buying a home. Closing costs can be significant, especially in a market where sellers have little incentive to make concessions to help cover them.
Homeowner’s insurance, property tax, and interest alone will likely total several thousand dollars. Costs vary by location, but a real estate agent or VA mortgage lender can help estimate your closing costs.
Tip Number One: Be prepared for closing costs and other out of pocket costs prior to finding your dream home. 3% to 4% of the estimated purchase price is not uncommon.
Do I need to be pre-approved?
Technically, no. However, finding a real estate agent or getting a seller to accept an offer without being pre-approved will be very difficult.
Pre approval benefits all parties. Selfishly, think of the disappointment you’ll experience if you find the perfect home for your family only to lose it because you don’t qualify for the VA loan. Fortunately, this doesn’t happen as often as it once did because, as mentioned above, it is extremely difficult to buy a home without being pre-approved unless you’re paying cash.
Tip Number Two: Get pre-approved. Shop around and choose a VA lender you’re comfortable with.
Will shopping around for a VA loan affect my credit?
Having multiple lenders look into your credit to offer you mortgage terms typically does not affect your credit score in any significant way. Generally speaking, any lender that pulls your mortgage report within 30 days of the first lender to do so will not count as a “hit” on your credit report. So rest easy. Being able to search for a fair deal is a staple of consumer protection provided by the credit bureaus.
That said, you’ll need to qualify for your VA loan both financially (debt-to-income and residual income) and by demonstrating you pay your bills (credit).
The intent of this post is not to be an infomercial for getting pre-approved, but if you haven’t figured it out yet, working with the experts who deal with VA homebuyers everyday has tremendous value.
As with most mortgage loans, the best rates go to those with the highest credit scores. Many lenders impose a floor when it comes to credit scores and who they will lend to. There are many places online that provide credit scores. However, it’s important to understand that scores provided by such services are not necessarily what your mortgage lender will use. Mortgage lenders often use a different scoring model than a consumer report.
Tip Number Three: Take care of your credit. It doesn’t need to be perfect, but pay your bills and try to keep credit card usage to less than 30-35% of your available credit. Monitor your credit prior to your home search or see Tip Number Two.
Do I Need a Special Realtor?
In addition to selecting a knowledgeable lender with which you are comfortable, your choice of real estate agent is important. Agents familiar with the VA loan process and the requirements put upon the property by the VA will improve your homebuying experience and increase the likelihood your transaction will close, which at the end of the day is what matters.
Tip Number Four: Use a VA friendly real estate agent. Talk to friends and family within your military circle for recommendations and get honest assessments from those you trust.
Buying a home is a monumental undertaking. If you’ve never done it, it can be undoubtedly overwhelming. Working with experienced professionals is possibly the easiest way to relieve at least some of the stress that comes with shopping for a home.