Designed to help service members become homeowners, the VA Home Loan program is one of the most widely known benefits of military service. However, many military families are uncertain of how to access this benefit or how to ensure that they are using it to its full potential. With the support of our partners at JPMorgan Chase, MFAN is helping military and veteran families understand more about VA Home Loans, how to use the program, and what to consider when utilizing the benefit. This blog has been generously written by and sponsored by JPMorgan Chase.
While the VA Home Loan program is widely known in the military-connected community, one-third of veterans and current service members do not even know that it is an option. So, what is a VA Home Loan and how does it differ from other types of financing?
VA Loans were first created under the Servicemen’s Readjustment Act of 1944, more commonly known as the GI Bill, to assist veterans returning from World War II in building financial stability. Partially backed by the U.S. Department of Veterans Affairs, these loans are still available to current service members, veterans and surviving spouses.
Benefits of VA Home Loans
No Down Payment
The VA Home Loan is one of the few home loans available with no down payment required.
Competitive interest rates and no private mortgage insurance result in lower payments.
Easier to Qualify
VA Loans provide an alternate homeownership opportunity for veterans and service members who may struggle to secure conventional financing.
No down payment, relaxed credit standards, and loans backed by the VA are especially helpful for first-time homebuyers.
One of the most significant benefits of using a VA Loan for a first-time home purchase is that there is typically no down payment required. Combined with competitive interest rates, no mortgage insurance (as usually found with conventional and FHA financing), and often fewer overall closing costs, these loans can make homeownership more accessible for military families.
Speak with a Lender
Anyone interested in utilizing their VA benefits to purchase a home should first speak to a lender who can assist with determining their eligibility. The lender will work to determine an appropriate purchase and should take the time to educate on estimated closing costs, monthly payment, and expectations around the loan process.
Interested homebuyers should also obtain their Certificate of Eligibility. This document is critical in determining whether or not someone qualifies for a VA loan, how much entitlement is available, and whether or not a funding fee will be required. Typically a lender can obtain this electronically directly from the VA after obtaining basic information, but veterans can access this as well to check their eligibility beforehand via the va.gov benefits portal. If there is an issue obtaining the certificate, a form called the VA 26-1880 may need to be signed and sent to the VA for additional research, along with a copy of the DD-214.
There are unique differences with a VA home loan versus other products:
- Primary residence: The first is the requirement to live in the home being purchased. This means it cannot be used as a investment or rental property, nor as a vacation home. That being said, there may be the option to convert the home into one of these at a later date (such as after receiving PCS orders or outgrowing the current home) and subsequently purchase a new primary residence. These options should be discussed further with a lender who can determine whether or not another VA loan can be utilized at that time.
- Appraisal: The VA also requires an appraisal to be completed on the home being purchased. Depending on the home’s geographic location and condition, additional inspections such as wood-destroying insect or water testing may be needed prior to the VA accepting the property. There are additional Minimum Property Requirements (MPRs), but typically the home should be considered “safe, structurally sound, and sanitary”. While an appraisal is required, this does not take the place of a home inspection, which is still always recommended to ensure there are no hidden issues or defects with the property being purchased.
- Funding fee: Another item to be aware of is the potential for a funding fee with the VA loan transaction. This is a one-time payment to the VA that is a percentage of the loan amount and depends on initial versus subsequent home loan usage and the amount of the down payment. This can be added to the total loan amount to be paid over time or be paid in full at closing. In certain scenarios, this funding fee is waived. The most common scenario is for a veteran currently receiving or eligible to receive compensation for a service-connected disability. The Certificate of Eligibility will also state whether a funding fee is required.
A VA Home Loan can help make homeownership possible for millions of service members, veterans, and their families — one of the cornerstones to building financial stability and generational wealth. The process may seem daunting, but an experienced loan officer can assist in determining if a VA home loan is the right product depending on each unique scenario and should help demystify the process further. Additional information is available at benefits.va.gov/homeloans.
This content is made possible through the generosity of JPMorgan Chase & Co. and the expertise of its employees. To learn more about securing a VA Home Loan for your future home purchase, visit chase.com/affordable.