Last Updated on February 7, 2023 by Bob Filipczak
Military home loans are essentially programs designed to help military personnel find and afford new homes. They can help you at many stages of the home ownership journey, and all of them are designed to say “thank you” to active military professionals, veterans and their families. Parades and national holidays are great, but helping you find a great home within your budget is an acknowledgement of your sacrifices that can make a significant difference in your life.
In the interests of cutting to the chase, let’s talk about the Cadillac of home loan programs for military service members: the VA Loan.
Military VA Loan: A Game Changer
The military VA home loan program was established as part of the GI Bill right after World War II. It saw its 75th birthday in 2019, and it is still one of the most popular benefits offered to active duty service members and eligible veterans. It is overseen by the U.S. Department of Veterans Affairs, and the list of benefits is substantial. With a mortgage guaranteed by the current VA loan system:
- Your loan will have low rates.
- You will have a low down payment or none at all.
- You won’t need to buy private mortgage insurance.
- You will have a cap on your maximum closing costs.
- The program does not have a minimum credit score requirement–though many lenders will have a minimum credit requirement.
- There is no penalty for paying your mortgage off early.
- You do not have to be a first-time home buyer to use VA military mortgage loans.
- It’s a lifetime benefit–you can reuse the benefit.
- VA home loans are assumable .
- There is no maximum loan amount, but the VA does limit its guarantee. Veterans can borrow up to $647,000 without a down payment in most of the country.
- The benefit can be extended to the military spouses and families of soldiers killed in the line of duty.
We cover everything you need to know about the VA loan in one of our blog posts. If you want to look into all the details of a military VA home loan, it covers the bases including eligibility, refinancing and other details of the VA loan process. This is a very popular type of loan, especially in a very competitive housing market. It’s important to remember that the loans you get through the VA loan program are actually from private lenders. The VA loan benefit is a way to guarantee the loan through the government, but the actual money and mortgage are from mortgage companies and banks.
Combine VA Loan Benefits with Homes for Heroes Benefits
Homes for Heroes has been working for 20 years to help active and retired military heroes find new homes, sell their current homes, or refinance a mortgage.
“I spent 32 years in the Army, and I was thrilled to learn about it from our real estate agent. Getting some money back helped with the cost of our cross country move.” – Diane, U.S. Army, found a new home in Texas.
Homes for Heroes can help members of the military and veterans in at least three ways.
- We can help you find a real estate professional.
- We can help you find a mortgage lender.
- We give you back an average of $3,000 in Hero Rewards® savings after you close on your house.
That middle step is probably the most help as you look for a loan. We connect you with mortgage brokers who have committed to helping military personnel in all the branches of the United States Armed Forces – Navy, Army, Marine Corps, Air Force, Space Force, Coast Guard, National Guard, Reserves; Active Duty and Veterans. They understand your unique challenges because they have worked and assisted service members.
The personal relationship you develop with your REALTOR® is important, but the relationship you develop with your lender will last a lot longer (15-30 years). It’s good to have your mortgage broker on your side. We can help you create that connection with someone who has prioritized serving and giving back to you through Homes for Heroes.
Simply sign up to speak with our local real estate and home loan specialists in your area. There is no obligation. There are no fees, no extra paperwork, no red tape; the process is exactly the same as a typical real estate transaction. You just receive excellent care from our real estate mortgage specialists and a Hero Rewards® check at the end. And your hero status doesn’t end when you retire. We work with retired and active-duty service members.
There are two more federal government programs that are not military-specific, but they can help you find and buy a home if the circumstances are right. They are also worth a look.
Other Military Home Loan Options
There are two more federal government programs that are not military-specific, but they can help you find and buy a home if the circumstances are right. They are also worth a look.
FHA Loans
FHA loans are insured by the Federal Housing Agency. With that insurance, the buyer only needs to put 3.5% down (conventional mortgages are much higher). Again, the government agency doesn’t give you the mortgage, but it does guarantee it so private lenders can reduce their requirements.
To be eligible for an FHA military house loan you need:
- A credit score of 620* or higher
- Proof of income (1-2 months of paystubs)
- W2 forms for one year
- An appraisal from an FHA-approved appraiser
- Current debt information (auto loans, credit cards, etc.)
- Acceptable debt-to-income ratio (DTI)
- The home must be your primary residence
*FHA loans are available to home buyers who have credit scores as low as 580, but they do require mortgage insurance.
USDA Loans
Many active and retired military members are looking to live in rural areas or small towns. If that’s you, take a look at USDA loans. These loans, backed by the United States Department of Agriculture, offer:
- No down payment
- Reduced mortgage insurance
- Lower interest rates
Rural, in this case, is defined by the government to include about 97% of the U.S. map, so check this mortgage program out. It can save you thousands of dollars, both at closing and for your monthly payment over the life of the loan.
Mortgage Lending 101
Knowing how mortgages actually work will give you a leg up when you are entering the housing market. It will help you ask the right questions and get the best answers.
Even the terminology can be confusing. The money lending industry has its own unique language, and they are inventing new words all the time (for example RON: a Remote Online Notary).
Once you start the application process, the mortgage loan company will be asking for a lot of information from you. Get pre-approved for your military home loan first. Pre-approval can be instrumental to your home search, especially in today’s competitive real estate market.
Credit Reporting
A bad credit report can be a non-starter if you are going through the mortgage process. If your credit score is below, say 620, it can stop the process cold. Certain kinds of mortgage insurance from Fannie Mae, for example, isn’t available if you have a score under 620.
The good news is that there’s recent progress in the world of credit history reporting. The Big Three, the companies that calculate your credit scores, have added the ability to include your rent into your score. That means if you pay your rent on time, it will count in your favor. How can that affect your score? A study back in 2017 reported that the average increase in credit score was 16 points higher when rent was factored in. While that was the average, the increase would be significantly more if you have a credit score below 620.
Down Payment
The down payment for a military house loan can be intimidating. Some will tell you that you need 20% down for conventional loans. That’s a big hill to climb, especially if you are a first time home buyer. Some financial experts are even questioning whether that’s realistic anymore with house prices being what they are.
Take a look at no money down military mortgages such as the VA loan (above).
Closing Costs
When you are getting near the end of your home buying process, closing costs can be a bit of a surprise. They might not seem like much compared to the size of the loan being processed, but we feel that the fewer surprises at closing the better.
These extra costs include insurance fees, appraisal costs, origination fees, taxes, insurance and more.
Save on Your Military Home Loan with Homes for Heroes
Taking the plunge into the home market – buying, selling or refinancing – doesn’t have to be done alone. There are ways to make things easier and save you some money along the way. Simply sign up today to speak with our local specialists. They would be honored to answer your questions and let you know how they can help you with your military home loan.
