Buying a house is a huge part of the American dream but unless you plan on paying cash for your new home, you’ll need to apply for a mortgage. For active military members and veterans, the VA home loan program is the best way to finance your house. However, if you’re not sure where to start with the application process, taking advantage of this loan type isn’t easy. Here’s what you need to know to get the best loan possible.
Make Sure You Qualify
Qualified veterans and active-duty military members are entitled to use a VA loan. To qualify, you must have served at least 180 consecutive days during peace-time or 90 consecutive days during wartime. Look at your service record and see when you started serving in the military. If you’re still serving and are just shy of hitting the service qualification, wait a bit longer until you apply for the loan. You’ll also want to get your Certificate of Eligibility that proves you’re able to use a VA home loan.
Decide How Much To Finance
One of the biggest benefits of buying a house with a VA home loan is the ability to finance the entire purchase price of the house. This means you don’t have to use a down payment to secure the loan. That said, using a down payment can help lower your monthly payments for the life of the loan.
Think about how much money you have saved up. If you want to, you can use some of those savings to offset the full purchase price of your home. Remember, the less you borrow, the smaller your monthly payments will be and the less you’ll pay in interest over the life of the loan.
Search for the Right Lender
Though the VA guarantees every VA home loan, it doesn’t issue them. This means you’ll still want to shop around for the best lender for your needs. Start by asking your real estate agent, friends, coworkers, and neighbors for recommendations. It’s always best to work with lenders that are familiar with the ins and outs of VA loans whenever possible.
Once you have a few lenders in mind, get quotes from each of them. Remember, it’s up to the lender to set your loan’s interest rate and principal amount. This means different lenders may view your finances in different ways. Compare your options and choose a lender that offers you the best deal.
Decide Between Fixed and Adjustable Rate Loans
Just like conventional mortgages, VA home loans come in two main types: fixed interest rate and adjustable interest rate. Fixed-rate loans give you a set interest rate for the life of the loan. It will never change as long as you hold the original loan. Adjustable-rate mortgages typically offer lower interest rates for the first few years. Then, their rates change with the market. This means you’ll be able to take advantage of ultra-low interest rates when they happen, but you could end up paying more if rates increase.
Ultimately, fixed-rate loans are best for buyers that plan to stay in their home for years to come. If you’re still on active duty and will likely have to move to a new base in the next few years, an adjustable-rate mortgage could save you money. Discuss your options with your mortgage lender before you sign any agreements.
Know the Use Restrictions
VA home loans are meant for military members and veterans looking to buy a primary residence. You can’t use the property as a vacation home or buy it as an investment property to lease out to renters. You must be willing to stay in the house for at least a year. If you’re looking to buy property to generate rental income, you’ll need to use a different type of home loan to finance the purchase.
Buying a home with a VA mortgage loan is a great way to reduce your costs and get the best deal possible. Keep this guide in mind when you start looking at VA home loan options.
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