Devoting one’s life to serving your country is a very proud and important deed for a U.S. citizen. Although hazardous and often treacherous, the road of a U.S. armed forces member is adequately rewarded with a surplus of benefits, including government-backed VA Home Loans, which allows private lenders to offer eligible members a better deal for their homes.
VA loans distinguish themselves from conventional home loans due to generally lower interest rates and credit score requirements for those who apply. VA loans also do not require down payments, and although they still require closing costs, these are typically lower than your average home loan closing costs.
While there will be some additional hoops to jump through, an experienced realtor with VA buyers is prepared to walk you through every step of the process to make sure our active-duty and veterans receive the lowest rates for their California homes.
What is a VA Loan and How Does One Qualify?
A VA loan is Department of Veteran Affairs-backed mortgage loan issues by private lenders such as banks or local lenders. They are available only to active-duty military personnel, veterans, and eligible spouses.
It is estimated that around 6% of total active-duty and eligible service members, including veterans used their VA loan benefits during 2020.
Many veterans relinquish their benefits due to general unawareness about the application process and too much red tape. Due to the VA’s stricter requirements for home safety, also known as the Minimum Property Requirements, many eligible members opt not to go through the VA in order to acquire the home they want and not necessarily one the VA would approve.
Here are other VA home loan requirements:
- Working HVAC units,
- Working electricity
- Working sewage systems
- Roofing that is adept and in full working condition
- Free of pests,
- Proper ventilation across attics or other crawl spaces
- Reachable from an accessible street
There are certain criteria a property must meet in order to be considered for the VA program, such as not being a second home, rental or vacation home, additionally, condominiums might have to be pre-approved by the VA as a whole before veterans or service members can apply for a home there.
To begin pre-qualification for a VA loan, eligible members must first obtain their COE, or DD Form 214. You can also request it directly from the VA’s eBenefits Website.
Why Consider a VA Loan for Properties in San Diego
There are several perks to utilizing a VA loan to buy your home. Some of the main advantages of VA loans are the ability to forgo private mortgage insurance (PMI), as well as lower closing costs and better rate of approval despite higher debt.
Private mortgage insurance can cost anywhere from 0.5% to 1.0% of the cost of your home, added to your monthly payments, so this benefit alone is enough to save borrowers thousands of dollars in the long term.
Waiving your down payment is also a great way to save money on closing costs or another way to keep some extra cash on you after you move. Lenders still recommend putting up to 20% or more of the total value of your home upon signing, and although this requirement is waived for VA home loans, the more money you can put down, the faster you’ll be able to pay off your mortgage. Knowing how much house you can afford will also help you develop a realistic budget for you and your family.
Your Credit Score in Regards to VA Loans
Another amazing perk of VA loans is that lenders can be flexible with regards to your credit score. While interest rates are generally lower for VA loans than for conventional ones, being backed by the federal government also gives lenders the ability to charge competitive rates.
Due to the ongoing pandemic, the three major credit bureaus are now offering free access to your credit reports through their websites, giving you a practical understanding of your financial situation, as well as an overview of your credit profile that your chosen lender will use to set your rates.
Seven Tips for Veterans Considering the VA Loan Program
Here are 7 summarized VA Loan tips to consider before applying for a home mortgage loan through the program.
1. Start the mortgage process without the Certificate of Eligibility (COE)
- Begin to shop around for a lender and request a pre-approval certificate before requesting the COE since this is verified later in the application process.
2. Pay attention to your credit score
- Although lenders are more flexible under the VA program, your score still has an impact on your final offer.
- Make sure to prepare for the process of acquiring a home by paying off any outstanding debt and clearing negative items from your credit reports.
3. Don’t forget closing costs
- A common misconception is that VA loans don’t require closing costs – do not fall for this!
- You are still responsible for certain out-of-pocket expenses, such as mortgage fees, real estate fees, and appraisals.
- The VA funding fee ranges between 0.5% – 3.60% and can only be waived by meeting certain criteria.
4. Shop for better rates
- Take ample time to browse through available lenders and find the best rate and terms.
5. Find an experienced VA real estate agent
- Finding an agent that is familiar with the VA loan process will make it all that much easier for you.
6. Choose a VA-approved property
- Certain properties like condominiums need to be verified beforehand by the VA in order to meet their safety requirements.
- Secondary homes, rental homes, or vacation homes are not approved under the program.
- The benefit is reusable under some circumstances.
7. Make plans to move in promptly
- One requirement of the VA is that the service member (or his family) must make plans to move into the property within 60 days of closing the deal.
How to Find the Best VA Loan in San Diego
Although the federal government backs up all approved VA loans, they’re not the ones you’re borrowing the money from. Since taking out a VA loan still needs to go through a traditional bank or mortgage institution, it would be helpful to find a real estate agent familiar with the VA process before getting started.
If you currently own your home and want to buy your next home using your VA eligibility, it’s definitely possible. We can walk through whether it makes more sense to keep your home as a rental investment or to sell and cash-out your equity. The best decision for you will depend on your eligibility, equity in your home, and your area’s specific VA guidelines around loan limits.
And as with any government loan program, there’s always a little more paperwork waiting for you. Luckily, Sherry Chen can walk you through the entire process without hassle and comes prepared with a list of chosen lenders who have proven to be reliable for California military veterans and active service members. Together, we can find the proper licensed VA mortgage lender to insure we find the right house for you.
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