Putting Home Ownership Within Reach
For many people, buying a home can be the realization of a lifelong dream. If you are an active National Guard Soldier, you may qualify for a Department of Veterans Affairs (VA) Guaranteed Home Loan, which carries benefits that can help make your home purchase experience stress-free.
What is a VA Guaranteed Home Loan?
The VA itself does not offer home loans. Loans are made by traditional lenders, such as private banks, mortgage companies or credit unions. The VA provides assistance by guaranteeing a portion of the loan against loss – meaning, the VA will cover part of the loan in the event the borrower cannot repay the loan. The guarantee enables lenders to offer service members loans with more favorable terms, such as (in many cases) no down payment, no mortgage insurance, limits on closing costs and possible assistance to borrowers having difficulty making payments.
The VA Guaranteed Home Loan is an option for both active and former Guard members. Guard Soldiers who are not otherwise eligible for loan guarantee benefits are eligible for a VA Guaranteed Home Loan after completing six years of service, unless released sooner because of a Service-connected disability. Soldiers must have received an honorable discharge, unless in inactive status awaiting final discharge or still serving.
The VA outlines additional requirements for qualifications to include a good credit rating, sufficient income to support the loan and a valid Certificate of Eligibility (COE). Applicants must also agree to personally live in the property, as VA guarantees do not apply to loans used to purchase rental property.
How to Use the Guarantee
A VA guarantee may be used to obtain a loan to buy or build a house or manufactured home and/or lot or a residential condominium. The loan may also be used to repair or remodel a service member-owned and occupied residence, refinance a current home loan, install solar heating/cooling or make other energy-efficient improvements.
The Application Process
Qualifying applicants must confirm eligibility with a valid COE. The purchase-property is then appraised by a VA-assigned fee appraiser. Note that this is not the same as a home inspection, which determines if the property has any significant defects. An appraisal solely estimates the value of the property. The VA does suggest having a reputable home inspection company complete a thorough inspection that includes a check of the plumbing, heating, electrical and roofing components.
Although the VA guarantee requires participating lenders to reduce or dispel certain fees, some fees are still paid by the borrower. Closing costs – such as VA appraisals, credit reports, loan processing fees, title searches, title insurance, recording fees, transfer taxes, survey charges or hazard insurance – must be paid in cash for home purchase loans. For refinance loans, closing costs may be included in the loan, as long as the loan amount does not exceed the reasonable value of the property. Borrowers must also pay a VA funding fee, which may be paid in cash or included in the loan.
For most service members, the choice of a VA Guaranteed Loan over a conventional loan will save thousands, if not tens-of-thousands, of dollars. Begin to take advantage of this phenomenal benefit by visiting Benefits.va.gov/HOMELOANS for more detailed information or to begin the application process.
BY STAFF WRITER Pamela DeLoatch