Last Updated on January 16, 2023 by Bob Filipczak
VA loan benefits can dramatically improve your home search and your ability to afford a new home. If you are a veteran or an active duty service member in the armed forces or uniformed services, you could be eligible for VA loan guarantees. With a VA loan guarantee in hand, you can save thousands or tens of thousands of dollars over the life of your mortgage. The numbers don’t lie: VA loans have helped more than 25 million veterans and eligible service members since it began in 1944. It helped 1.2 million military service members in 2020 alone.
Before we jump into the benefits, it’s important to point out that the VA loan program doesn’t actually give you the loan. The loan, the mortgage and the money all come from either a private mortgage lender or a mortgage broker.
Benefits of a VA Loan: The Complete List
One of the most encouraging things about the loan program sponsored by The U.S. Department of Veterans Affairs is: the more you dig, the more you find. So hold on, because this is the list of what the VA Loan Program can do for you.
- There is no down payment required, and that will save you thousands of dollars up front. The only case where you might have to pay some money down is if you want to get a mortgage for more than the appraised value of the house.
- The program typically gives you lower interest rates than the current market, but not everyone agrees on that. The VA organization doesn’t directly control the interest you pay. That’s determined by a private lender. That said, if you are approved by the VA for their loan guarantee, private lenders will often give you favorable terms, i.e. a lower rate, on the mortgage because you are a veteran and the VA is backing the loan. Less risk for the lender often equals better interest rates.
- Private mortgage insurance (PMI) is also not required. That can save you hundreds of dollars a month and thousands over a year.
- The VA loan benefit will limit your maximum closing costs, which can be paid by the seller.
- There is no minimum credit score required from the VA. That said, the aforementioned private lenders may require a good credit history. They typically want scores 620 or higher, but may consider scores between 580-620.
- There is no penalty for paying your mortgage off early.
- You do not have to be a first-time home buyer to use a VA home loan.
- You can reuse the benefit throughout your lifetime, as long as the home you are buying will be your primary residence.
- Your VA home loan is assumable.
- There is no maximum loan amount, however the VA does limit its guarantee.
- The VA does not technically have a maximum debt-to-income (DTI) ratio requirement, which is the comparison of your monthly income to the debts (car loan, student loans, credit card balances, etc) you have to pay each month. It does, however, have strong suggestions to private lenders about what to allow.
- For a VA loan first time home buyer, the agency lowers its funding fee (2.15% of the total loan). The VA funding fee is a one-time fee you pay to get the VA loan. The funding fee is also waived for veterans with service-related injuries, disabilities or recipients of the Purple Heart.
- If you have a bankruptcy or foreclosure in the past, you aren’t automatically disqualified from a VA loan. If your foreclosure or bankruptcy was more than a year ago, you could be eligible.
- The VA home loan benefit can be used for single-family homes (up to four units), condos, manufactured homes, new builds and home improvements like solar panels.
- VA loans may also be available to the surviving spouse of a service member or veteran who was killed in the line of duty, passed away as a result of a service-related injury, or is a POW/MIA.
- The VA also provides foreclosure avoidance assistance if you have trouble paying your mortgage in the future. This is like credit counseling to help veterans and military service members avoid foreclosure if they are having financial difficulty. The number to call is 877-827-3702.
VA’s Range of Loans
If you are simply looking to buy a new home, or your first home, a straight-up VA loan guarantee is probably all you need. However, there is a whole range of benefits of VA loan guarantees that can help you depending on your circumstances. After you’ve owned your home for a while, refinancing your mortgage may become a useful tool to help manage your financial life. The VA can help with that too.
This is the main VA loan. Using this VA loan to get a mortgage to buy a home is the most popular use of the financial tool.
The VA Interest Rate Reduction Refinance Loan (VA IRRRL) is something else to consider. These are refinance loans you can use to reduce the interest you pay on your mortgage. That typically becomes an option if interest rates are falling, but if you can successfully refinance your mortgage, it can reduce your monthly payment in the short term, and your overall mortgage payments in the long term.
This is known as a streamline refinance by the VA. It requires a lot less documentation, fewer requirements and less stress overall. It is also a fast refinance and can usually be in place in about 30 days.
This option is only open to those who already have a VA-backed mortgage.
This is another refinance option from the VA, but this lets you refinance your mortgage and turn the equity you’ve developed in the property into cash. You can use this cash to repair your home, renovate it, install energy efficient elements, pursue your education or take care of emergencies (for example, medical bills).
This loan is not streamlined and very much like a typical refinance with all the rules and documents.
This option is open to VA borrowers and conventional mortgage holders who qualify for a VA loan but may have missed it the first time out. That ability to convert conventional loans into a VA mortgage, and get cash back, makes this a very attractive option under the right circumstances (see list of benefits above).
Native American Direct Loan
If you’re a veteran or active duty service member, and either you or your spouse is Native American, you could be eligible for the NADL. These loans let military veterans and active-duty service members buy, build or improve a property on federal trust land. If you qualify, you can also use this loan to refinance your current mortgage.
Adapted Housing Grants
This is not really a loan guarantee, like the others, but actual money that helps eligible veterans with a permanent and total service-connected disability. The grant (up to $100,000) can be used to help purchase or build an adapted home, or it can be used to modify an existing home to make it more accessible.
Who Gets VA Loans
If you’re not sure if you qualify for the VA loans out there, here’s a list of qualifying military and uniformed service members who typically get VA loans.
- Air Force
- Coast Guard
- Space Force
- National Guard
- Reserve members
- Public Health Service
Generally, as a veteran or active duty first time home buyer, if you served at least 24 continuous months in the armed forces, you likely qualify. There is a long list of dates and length of service requirements, but it’s pretty easy to figure out.
Homes for Heroes Adds to VA Loan Benefits
One vital component of accessing the VA Loan benefits is having a private lender on board to both help you get through the forms and give you the loan. One part of the Homes for Heroes experience is connecting veterans and military personnel with the right mortgage specialist.
“Overall great experience. I was able to use the Homes for Heroes program along with my VA Loan and purchased the home of my dreams. The Homes for Heroes real estate agent was phenomenal and I couldn’t be happier. Thank you!” – Stephen, Navy, bought a new house in Texas.
Our network of mortgage brokers joined our organization because they wanted to help heroes like you find a great home and secure a good mortgage. When you work with Homes for Heroes, our mortgage specialist will be part of a larger team that includes a real estate agent, an inspector and a title company. Together they will help you find the home you want. And then, when you close on a home, Homes for Heroes will send you a Hero Rewards check, which averages $3,000, as a way to thank you for your service.