VA Loan Basics for Military Home Buyers: Down Payments, Eligibility, and More

VA Loan Basics for Military Home Buyers: Down Payments, Eligibility, and More

When I first meet with military home buyers many of their questions are about the VA loan. I am happy to hear they know about the benefit and even happier to teach them how to use it. As a Realtor heavily experienced with VA Loans, I’ve seen firsthand how this incredible benefit empowers military families to achieve the dream of owning a home.

If you’re a first-time home buyer or it’s been a while since you applied for a VA loan and need a refresher, these facts will help you understand what to expect when we start talking about your home-buying journey.

1.  The Department of Veterans Affairs Secures Your VA Loan
Some inexperienced military home buyers think the Department of Veterans Affairs directly funds their VA loan, but the VA loan program is a benefit partially secured by the VA. The loans are actually processed through an approved mortgage company. This is good news for you—lenders are more likely to offer you lower interest rates and flexible requirements with a government guarantee.

2. A Down Payment Isn’t Required
Zero down payment is a game-changer for many military home buyers. Unlike traditional mortgages that often require a 20% down payment, VA loans let you purchase a home with little to no money down. This is a huge advantage, especially because saving for a house can be tough while serving. Funding fees are involved (keep reading for more info), but the overall financial burden is significantly lighter. Keep in mind that mortgage loan experts generally recommend having 5 to 10% of the home’s purchase price available to pay for closing costs, funding fees, and earnest money.

3. Private Mortgage Insurance Isn’t Necessary
Private mortgage insurance (PMI) protects the lender if you default, but since the government is backing a large chunk of the loan, they waive PMI. Compared to a traditional mortgage that requires PMI, you could save thousands of dollars over the loan’s term. This savings gives us the chance to discuss how to use your money for other house-related payments.

4. VA Loans Aren’t Just For Active Duty Servicemembers
The VA Loan program is open to a wider range of service members than you might think. Veterans with honorable discharges, National Guard and Reserves members who meet service length requirements, and even some surviving spouses may also qualify.

The VA loan application process requires a Certificate of Eligibility (COE); your eligibility should be detailed there.

Generally, you’ll need at least 90 days of active duty during wartime, 180 days during peacetime, or six years of service in the National Guard or Reserves. Understanding eligibility criteria can be a little overwhelming, so we can chat about your circumstances, but you should also check the VA website for details.

5. Credit Score Flexibility
While good credit is always a plus, VA loans are usually more forgiving than conventional mortgages. The minimum credit score requirements vary by lender, but most look for minimum scores in the mid-600s. If you’re worried about your credit score, we can uncover your options with a lender I trust. Even if your score isn’t perfect, your service history and stable income are major factors in your approval.

6. VA Loan Funding Fees
Although VA loans don’t require a down payment or PMI, you’ll likely pay funding fees. The government uses these fees to pay for the program and ensure availability in the future. They vary depending on your down payment, service history, and whether you’re a first-time user. While you can roll these fees into your loan amount, budgeting for them upfront is smart. We can talk about ways to minimize these fees with a larger down payment or by accessing disability benefits.

The VA waives the fee if:

• “You’re receiving VA compensation for a service-connected disability, or
• You’re eligible to receive VA compensation for a service-connected disability, but you’re receiving retirement or active-duty pay instead or
• You’re receiving Dependency and Indemnity Compensation (DIC) as the surviving spouse of a Veteran, or
• You’re a service member who has received a proposed or memorandum rating before the loan closing date that says you’re eligible to get compensation because of a pre-discharge claim, or
• You’re a service member on active duty who, before or on the loan closing date, provides evidence of having received the Purple Heart.”

7. The VA Loan Is For Primary Residences Only
VA loans were designed to help veterans purchase homes they intend to live in as their primary residence. You can’t use the loan for investment properties or vacation homes. However, you can use a VA loan for various types of primary residences, like condos, townhouses, or single-family homes, as long as they meet VA property approval standards.

8. You Need a VA Loan Property Appraisal
The VA loan requires a property appraisal (different from a home inspection!) to ensure the home meets safety and value standards—they’re called Minimum Property Requirements. These are some of the MPRs that appraisers look for:

• Primary residence: if the property is a multi-family unit, you must live there
• Enough space for safe living, including sanitary sleeping and cooking facilities
• Working plumbing and electrical systems
• Safe access from the street

MPRs make buying a fixer-upper or an “as is” property challenging, but we can talk about negotiating with the seller to make improvements to meet the MPR standards.

9. You Can Use Your Benefit Again and Again
Your VA loan entitlement is a renewable benefit. Once you’ve used it to buy a home, it replenishes after a full and timely repayment or if you have remaining entitlement available. This means you can potentially use a VA loan for a future home purchase or even refinance your existing mortgage down the line. If you think using your VA loan again is possible, talk with the VA directly so they can review your COE.

As you can see, there’s a lot to know about the VA loan, but don’t worry.

I have worked through over 100 VA loans over the last few years and can help you navigate the process. I’ll show you the properties you are interested in and connect you with a lender specializing in VA loans if you need one. I’ll also work hard to foster a seamless relationship between you and your lender to ensure you get the best deal.

Connect with me today for more VA loan information.

(937) 451-9696
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