The United States of America disburses between $218 to 262 billion a year for defense-related platforms such as Veteran Affairs and Homeland Security. The budget that the US allocates for Veteran Affairs has aided many millennials and Generation Z vets to procure their own homes through VA home loans. 52% of all VA home loans in the first half of 2021 were taken by millennials and Gen Z veterans. This was despite a housing shortage that started around the latter half of 2019. These are what veterans can expect if they decide to use one of their benefits.
VA Loan Terms
A VA loan is a type of mortgage guaranteed by the US Department of Veteran Affairs. This means that the government will repay part of the loan amount to the lender in case the borrower is unable to make the monthly mortgage payments for any reason. A VA loan or a Hero Home loan does not require a monthly down payment and mortgage insurance, unlike conventional loans. VA loans offer competitive interest rates and typically have modest closing costs. There is, however, a funding fee that may cost between 1.4% to 3.6% of the loan amount. This fee goes towards the cost of foreclosing in case the borrower is unable to pay. Vets can only use the loan for a primary home, not for a vacation house or a property investment. Bear in mind that not all properties are eligible and must be inspected by a VA appraiser.
Possibility of Denial
Approximately 15% of applications are denied, but some may be able to reapply. Loan applications may be denied based on the following: military status, credit, income, and application. Vets must have served a minimum of between 90 days to 2 years and must either be active, honorable discharged, or retired. A credit score does not matter, but applicants must have a good record of payment in the last 12 months before the application. Eligible vets can apply even if they have a low income as long as it’s stable.
Application Process
Borrowers must first acquire a VA Certificate of Eligibility (COE). This certifies that an individual’s military service makes him or her eligible for a loan. A lender approved by the VA may be able to help in procuring a COE. Search for a lender you can work with. Compare what they offer and find out which one suits your needs. It would be helpful if you can get preapproval from more than one lender. Find a home that’s perfect for you. Most lenders are able to assist you with this and some have a real estate network that will have properties that are most likely to be VA-approved.
It will take from 50 to 55 days to close a VA loan. You can speed things up a bit by requesting your COE early, get preapproved before putting down an offer for a house, and make sure that the property meets minimum property requirements (MPR). Partnering with a lender that can assist you with all of these will make applying for a VA home loan a breeze.