Having a place to call your own—whether you’re going to be there for four years or forever—is an essential part of the American dream. The U.S. Department of Veterans Affairs offers plenty of great programs to help those who have served in the military get a home loan, but the process isn’t foolproof. First-time home buyers aren't the only ones who make buying mistakes. Even people buying their second home, or their 10th, can be thrown off course when buying a new home and dealing with lenders.
You can avoid your own buyer's tale of woe (or headbanging frustration) by avoiding those mistakes before you start your home search. We asked VA-savvy real estate agents to tell us which missteps they see the most—and how you can avoid them when you apply for and get a VA loan.
If you’re getting a VA loan, make sure you work with a real estate agent who understands the VA home loan process.
“I see a lot of people go with an agent who doesn’t understand the VA system,” says Katie Fraser, a Realtor® with Trident Realty Group Northwest in Seattle. “The VA won’t underwrite [just] any house. It is a huge, huge, huge deal to use an agent who understands the VA home loan system, the VA appraisal process, and what that all really looks like.”
When you’re buying through the Veterans Affairs department, you’ll need to find a home that meets VA home loan property requirements. A VA loan program appraiser will have specific criteria (e.g., fixer-uppers, and even some newer homes, won’t qualify). An agent experienced with home loans for veterans will also know about VA loan limits, the debt-to-income ratio lenders will expect you to have to qualify for a home loan, and other essential information.
Save yourself the headache of making an offer on a house that may not get approved, or for which you may not qualify for a VA loan, and work with a VA-experienced real estate agent from the start. Ask another veteran for a referral, or get help from Veterans United Realty to find the right real estate agent.
Veterans have access to arguably the most powerful home mortgage option on the market, but about 33% of home-buying veterans don’t know they have a home mortgage benefit, according to the VA.
When you first meet with your lender, be sure to discuss your service member status so you can be informed about all of the potential advantages for veterans.
One of the biggest benefits you’ll get with a VA loan is the ability to buy with a 0% down payment (yes, we're totally serious). Not having to make a down payment can make it possible for veterans to buy a first home, often years sooner than if they had to save up for a down payment first.
VA loans also come with low-interest-rate mortgages, don't require mortgage insurance, and have more forgiving credit eligibility requirements.
"Veterans should ask their lender if they offer any incentives for veterans," adds Alissa Gerke, broker and owner of Select Realty Group, in Columbia, MO. "I’ve seen lenders waive appraisal fees, offer a waiver of origination fee if the veteran has a certain credit score, or other lender credits."
Pretty much everything will get easier as soon as your lender knows your eligibility for veteran status, so speak up!
While you'll have a ton of financial advantages with your VA loan, you willhave some borrower costs to deal with.
“Probably the biggest mistake I see is active-duty members coming into the home-buying process and not knowing there are other closing costs and fees necessary for buying a home,” Fraser says.
When you’re buying a home, even if you have little or no down payment, you’ll likely have to plunk down a bit of cash for things like a home appraisal and inspection. It might not cost much in the large scheme of things, but it'll help speed things along if you come prepared knowing what you'll have to shell out for.
Maybe you think there's no sense in buying if there's a chance you might be relocated in the next few years. But that doesn't mean you shouldn't buy; in fact, that home could end up being a smart investment.
By searching in high-demand areas or choosing a popular home style and size (say, 1,500 to 2,000 square feet), you’ll give yourself a better chance at resale if you need to move later. Or, you can hang on to it and rent it out.
My clients and I "often go out and look for their first rental home, not just a home for their family," Fraser says. "With so many in transition, they’re able to purchase a home and it becomes an investment property for them when they go on to their next duty station or they move.”
Don’t like the idea of becoming a landlord? A VA loan is assumable (meaning you can transfer the loan and the property to another vet), or you can just sell the home to a nonmilitary buyer. And don’t forget: You can use your VA home loan benefits again and again, so you can own a rental property and a new home. You can even refinance a VA loan if you are an active-duty service member. You may want to refinance if you have a non-VA loan, to increase your loan amount and tap into your home equity, or if you can get a better interest rate with a new VA loan.
Once home buyers find a home and their offer is accepted, they can be excited about moving in and making it theirs. Maybe you have an eye on a new big-screen TV, and you're looking into financing a new living room set you love. But don’t do that until you're really a homeowner, even if your lender has approved your mortgage loan.
It's easier to get a VA loan than a conventional, non-VA loan, but you still must meet lender requirements.
“Opening a line of credit or making a big purchase after mortgage approval is a common mistake,” Gerke says. “This can oftentimes change the veteran's credit score and make them ineligible for the loan.”
Wait until after closing to make any other financial moves, just to be on the safe side and to keep your loan on track.
| Aug 20, 2019