VA Home Loan
Veterans Home Loans
What is a VA Home Loan?
The VA Home Loan is a $0 down payment mortgage that is available to active duty military, veterans, and their spouses.
The Veteran Home Loan is a method of financing by which service members, veterans, and eligible surviving spouses can take advantage of their VA Loan benefits to become homeowners. These loans serve as a “guaranty benefit” to help you buy, build, repair, retain, or adapt a home for personal occupancy.
Note that the Veterans Administration does not lend you any money with these veteran home loans. Instead, these veteran home loans are provided through private lenders, such as local, regional, and national banks and other mortgage companies.
When private lenders give these loans to veterans, the Veterans Administration guarantees a portion of this loan (usually 25% of the loan amount), which reduces your private lender’s risk and allows the lender to loan veterans money with an increased certainty that, if the veteran does not pay the loan back, the lender can recoup at least a significant chunk of the outstanding debt from the Veterans Administration. Because of this, the VA Loan can often allow veterans to receive more money at a lower interest rate.
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Who is Eligible for a VA Loan?
For a full run-down of eligibility requirements, please visit the officialVA website. For the vast majority of us, anyone who has served for at least 90 days of continuous active duty service is eligible forVA Loan benefits. This includes those who are currently active duty military, and those veterans who have either separated or retired from active duty. In addition, it is expected that the VA Loan user (or borrower) have at least a 580 credit score—although in some cases, applicants have their veteran home loans approved with a credit score as low as 500…Speak with a professionally certified, licensed lender familiar with these wonderful military home loans if you have any questions specific to these requirements.
The Benefits of a VA Loan
The benefits of a VA Home Loan are manifold. Below are some of the highlights, with further explanation regarding the unbelievable opportunities available to us with VA Loan eligibility.
- $0 downpayment to purchase your home
- Very low barriers to entry for financial and credit history
- The lowest interest rates in the industry–across all loan packages!
- Many lenders will offer a “hero’s bonus” where they reduce or eliminate some of their fees for processing your loan applications
Because of the lower amount of risk, lenders can give veterans very competitive interest rates. Indeed, VA Loans allow our lenders to offer veterans the lowest interest rates of any other loan package in America…by alot! *For instance, as of November of 2021 the average 30-year conventional loan charged 3.625% interest; the average 30-year FHA loan charged 3.5% interest; and the average 30-year VA Loan charged 3.125% interest. Compare the differences among all options using a home purchase amount of $250,000.
|30-year Conventional, 20% down at 3.625%||30-year Conventional, 5% down at 3.625%||30-year FHA, 3.5%||30- year VA, 3.125%|
|Interest Paid over 30 years||$128,358||$152,424||$148,746||$135,538|
The 30-year conventional loan with a 20% down payment is competitive against the benefits of a VA loan, with one exception: the homebuyer would have to spend $50,000 in cash at closing in order to purchase the home using the 30-year conventional loan. Think of the opportunity cost involved with spending $50,000 cash on something when we could put that money to better use with home improvements, 10 to 15 really nice vacations, or other forms of investment!
VA Loan Rates
Interest rates vary based on a number of factors, including the veteran’s financial history, credit score, and more…including market & interest rate trends that are out of everyone’s control. Suffice it to say, VA Home Loan interest rates tend to be, on average, about 0.5% lower than the average conventional loan rate…which can save you thousands of dollars per year, and tens of thousands of dollars over the course of your loan!
The VA Loan Process
Similar to the FHA Loan program, the Veterans Administration will not be your lender for the VA Loan. The money for your home financing will be given to you by a private lender.The Veterans Administration guarantees 25% of your VA Loan, which means your lender will feel more comfortable loaning you money because they know that they should most likely be able to recoup their money if they need to.
The lender also knows that, because you are associated with the military (and if you’re lucky, with Barksdale Air Force Base), you probably have a good work ethic and a steady paycheck every month. All of these factors ensure that the lender’s risk is lower than it would be if you were not a veteran. Below are the steps to take when pursuing the purchase of a home using your VA Home Loan:
- Contact us to acquire a local real estate agent to help you qualify and organize your pursuit of a home to purchase.
- Your real estate agent will help you identify qualified and licensed mortgage lenders and loan officers.
- Provide your loan officer with the info requested; usually your Leave and EarningsStatement (LES) and other personal/financial information that will help them determine your pre qualification status (spoiler alert: most military qualifies with no issues as-is).
- Your loan officer will issue you a pre-qualification letter. This letter will be from the loan officer, addressed to you, telling you how much money they will be willing to lend you based on your financial ability.
- Once prequalified, you and your real estate agent will visit homes you wish to buy based on your needs and wants. This is the most exciting part of the process!
- As soon as you have identified a home you would like to purchase and live in, your real estate agent will help you negotiate for the best possible price, taking care of all of the paperwork and making things very easy on you and your family! Your real estate agent does not get paid by you! Rather, the convention in Louisiana is for the seller to pay your real estate agent’s fees…This is the beauty of buying!
- Once the seller and buyer agree on the terms of the purchase, including price, timeframe for inspections, and timeframe for “closing” (the day you get the keys and the title to the house),the house is yours! There will be many forms for you to complete and sign at the closing table, which takes place at a title attorney’s office locally. Your real estate agent will help prepare you for any details. Please consider making your real estate agent be a Barksdale Realtor®!
If you’re moving to the area around Barksdale AFB, Louisiana, please know that you can work with a fellow veteran who is also a Shreveport-Bossier real estate agent with much understanding regarding VA Home Loan benefits to assist you as you search for homes for sale in Shreveport, Bossier City, Benton, and Haughton.