Money Smarts Blog

House hunting comes with plenty of big questions. A front porch or a bigger backyard? Move-in ready or room to make it your own? As a Mortgage Loan Officer, I’m here to help with another important one: how to finance it. Your VA home loan benefit may help make homeownership more affordable, with benefits that can include no down payment and no monthly mortgage insurance. Since the original GI Bill passed in 1944, the U.S. Department of Veterans Affairs (VA) has helped eligible borrowers pursue homeownership. Eligibility, lender approval, and property requirements still apply, but you don’t have to sort through the details alone. Let’s start with what to know before you start house hunting.

So who’s eligible for VA home loans? Eligibility depends on your service history, when you served, and your discharge status. Veterans, active-duty service members, and members of the National Guard or Reserves may qualify, and certain surviving spouses may also be eligible. A Certificate of Eligibility (COE) confirms your eligibility for the benefit, but you’ll still need to meet your lender’s credit and income requirements.

Thinking about taking advantage of this awesome veterans’ benefit? Here are the 9 essential facts you should know about VA home loans:

For a VA-backed loan, you work with a participating lender.
Private lenders, including participating credit unions, issue VA-backed home loans. The U.S. Department of Veterans Affairs guarantees a portion of the loan rather than lending you the money directly. That backing helps lenders offer favorable terms, but you still apply through the lender and need to meet its approval requirements.

A down payment may not be required.
VA-backed loans often offer competitive interest rates and the option to buy with no down payment. Your rate still depends on factors such as your credit history and your lender’s terms. A down payment may be needed in some situations, including when the purchase price exceeds the appraised value or your available VA entitlement doesn’t support the loan amount. Compare rates, fees, and total borrowing costs before choosing a mortgage.

There’s no monthly mortgage insurance.
VA-backed loans don’t require private mortgage insurance (PMI) or FHA-style mortgage insurance premiums. That can reduce monthly costs compared with a loan that requires mortgage insurance, but your actual savings depend on the loans you’re comparing. You’ll still need to budget for your mortgage payment, property taxes, homeowners insurance, and any applicable fees.

Your benefit isn’t one and done.
You can use your VA home loan benefit more than once, as long as you meet the requirements. That may involve restoring entitlement used on a previous loan or using entitlement you still have available. Entitlement is the amount of VA backing available for your loan, and it can affect your next purchase. Paying off a previous loan doesn’t automatically settle every reuse requirement, so have your lender review your Certificate of Eligibility before you buy again.

The property has to qualify, too.
VA-backed loans are for residential purposes, and the home must meet VA property requirements. A standalone storefront isn’t eligible, but a farm residence may qualify, and some VA loan options allow you to buy and improve a home. A fixer-upper isn’t automatically off the table, but the property, planned repairs, and lender’s available loan programs all matter. Talk with your lender before ruling a property in or out.

It needs to be your home, not just an investment.
VA-backed purchase loans generally require you to intend to occupy the property as your primary residence, rather than buy it solely as a rental or vacation home. That doesn’t rule out every property with rental income: an eligible property with up to four units may qualify if you live in one of them. Your lender can explain the occupancy requirements and any applicable exceptions.

A funding fee may apply.
Most borrowers pay a one-time VA funding fee, but some qualify for an exemption. The amount depends on your loan type and may also depend on your down payment and whether you’ve used the benefit before. You can pay the fee at closing or finance it into your loan, which increases the amount you borrow. Your lender can confirm your fee and whether you qualify for an exemption. Other closing costs may also apply.

Buying with someone else comes with extra rules.
A spouse or another eligible veteran may be a co-borrower, but those aren’t the only arrangements VA rules allow. Some joint loans can include a non-veteran who isn’t your spouse, although additional approval requirements and a down payment may apply. Not every lender offers these loans, so ask about available options before making plans to buy together.

At IHMVCU, you can buy anywhere nationwide.
Thanks to our partnerships with Plaza Home Mortgage and Newrez, we’re able to originate VA home loans in all 50 states! Your hometown credit union can help you finance your dream home anywhere, we’ve helped Active Duty members find homes in Fort Benning, GA and Fort Campbell, TN.

Ready to explore your options? Give us a call to discuss VA home loans, review the eligibility and documentation requirements, and understand the costs before you apply. Whether this is your first home or your next move, start with answers to your questions.