Home buying tips for veterans

Buying a home is a major emotional milestone. This is especially true for veterans, who spend the majority of their careers moving from base to base without a permanent place to call home.

Whether you are currently actively serving in the military or a veteran, there are a number of benefits specifically for military members. The following three tips can help veterans as they prepare to buy a new home.

1.     Learn about VA loans

The majority of veterans are eligible for VA loans; these loans are offered by private lenders, but are backed by the U.S. Department of Veterans Affairs.

“Like any homebuyer, veterans eligible for the VA home loan program should shop around to different lenders to find the best mortgage for their needs,” said Redfin chief economist Daryl Fairweather.

VA loans are designed to be competitive and affordable for veterans. The loans require $0 down and do not require PMI, or private mortgage insurance, for those who put down less than 20%. Likewise, credit requirements are looser than many traditional mortgages. A new law that began January 1, 2020 has eliminated VA loan limits, which previously prevented veterans from purchasing high-dollar properties.

While VA loans do have additional funding fees, they serve a higher purpose; the 2.3% funding fee for first-time loans goes directly to the Department of Veterans Affairs to help cover the costs of the program. These funding fees can be either paid upfront or rolled into the life of the loan.

2.     Know the acceptable uses

VA loans are not without stipulations. The program is for the purchase of a primary residence; this can be any single-family residence including new construction, manufactured homes, or condos. Multi-unit properties may also be eligible as long as the service member will live in one of the units. The loans are not available for the purchase of investment properties, vacation homes, farms, or other income-producing properties.

Because the property must be a primary residence, occupancy requirements can be a concern for some service members. The home must become the primary residence of the service member within 60 days of closing. However, there are exceptions to the occupancy requirements, the most common of which is a spouse’s ability to fulfill it. Single service members, those deployed, or overseas contractors should discuss their concerns with their loan officer.

3.     Reliable income is important

Stable, reliable income is an important part of qualifying for any mortgage – including a VA loan. Ideally, lenders look for at least two years of employment with the same employer. Changing jobs during the loan process, even if another job is lined up, can cause loan eligibility to be withdrawn. This is important for service members who are preparing to transition to civilian status.

In addition, lenders will look for applicants with a debt-to-income, or DTI, ration of 41% or lower. Credit history and credit score are also taken into account when evaluating loan eligibility. Buyers should avoid making large purchases, changing jobs, or taking out additional lines of credit during the home buying process.

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