VA Home Buyer Guide

Although the process for buying a home is virtually the same for all buyers, there are a few important things to be aware of if you are using VA Benefits.  You may wonder if you are eligible to use VA Benefits.  Here are the basic requirements:

Generally speaking almost all active duty and honorably discharged service members are eligible for a VA Home Loan.

You May Be Eligible If Any One of the Following are True:
 • Served 181 days during peacetime (Active Duty)
 • Served 90 days during war time (Active Duty)
 • Served 6 years in the Reserves or National Guard
 • You are the spouse of a service member who was killed in the line of duty.

If you qualify, you need to speak with a VA Approve Lender.  At some point you will need a COE (certificate of eligibility), but lenders have the ability to get these for you.  If you want to know more, go to the FAQ page at: http://www.homeloans.va.gov/faqelig.htm

The major differences to be aware of between VA loans and non-VA loans are few, but worth mentioning.

1. VA loans can be arranged with NO DOWN PAYMENT. 

Be advised that although there is no monthly mortgage insurance, there is a VA Funding Fee charged up front and rolled into the loan usually which does provide mortgage insurance to the lien holder.

FHA loans require 3.5% down minimum, and there is an up-front mortgage insurance premium as well as a monthly premium.

Conventional Loans generally require 20% down, but do not have any mortgage insurance premiums.

2. The VA appraisal process is different than non VA appraisals. 

Your loan officer will order the VA appraisal. He/she will submit the appraisal request through the online portal of the Department of Veterans Affairs. The VA then randomly assigns an appraiser to your property. 

The fee for a VA appraisal is state mandated and set in each state. It is normally between $400 and $500 depending on the state. Often times you will be required to pay this fee before you close on the loan.

Many issues can affect an appraisal and certain things must be repaired before a VA Loan can close. Often these are safety issues, such as stairs with no railings or back doors without decks. The home cannot be in disrepair. It needs to be livable and in decent condition.

For the most part all repairs noted on an appraisal have to be completed before closing on the new loan. Sometimes if circumstances arise beyond your control the lender will allow you to escrow for a repair and take care of it when weather or other factors permit.

FHA Appraisals are generally as strict as VA Appraisals, and conventional appraisal guidelines are less strict.  This is generally due to the fact that FHA and VA loans require the buyer to have little at stake in the form of equity, so the risk is higher for the lender.  This stricter appraisal helps ensure the home being purchased is less likely to need a bunch of repairs if there is a loan default.

3. Seller contribution to buyer closing cost up to 6%

In most cases, 3% of the purchase price is sufficient to cover the buyer closing and settlement costs.  In the case of the VA loan, up to 6% is allowed and overages can be paid to reduce the VA buyer's other debts.  For example, if there is an overage of $1500, the buyer cannot receive this in cash, but the funds can be used to pay down a credit card or other debt on behalf of the buyer.