Your Battle Plan for Buying a Home With a VA Loan

Choose experienced professionals to guide you through the VA loan process, and bring some cash to the table, even if you don't plan to make a down payment.
Barbara MarquandOct 28, 2020
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If you've served in the military, a mortgage backed by the U.S. Department of Veterans Affairs may be your ticket to home ownership. VA loans don’t require a minimum down payment or mortgage insurance, and they often have lower interest rates than other mortgages.

"Using that VA loan is an opportunity to buy a chunk of America and build wealth," says Levi Rodgers, a former Green Beret and owner/broker at Re/Max Military City in San Antonio.

But applying for and using a involves steps other mortgages don't, and not all sellers or real estate agents are familiar with them. It's important to be prepared and choose the right professionals to help you, especially in a competitive housing market.

Here are some tips that can smooth the process.

You can request the certificate through the VA or ask a VA-approved lender to help you get it.

Not all lenders offer VA loans, and of those that do, some focus on working with military borrowers more than others.

"If you want a good steak, you probably want to go to a good steakhouse," Parker says. Likewise, if you want a VA loan, choose a lender that does a lot of VA lending.

The VA loan program has its own rules, so you want a lender that understands the requirements and can guide you through the process. Ask potential lenders if they have loan officers who specialize in working with military borrowers.

Another consideration when lender shopping: See if your state has any home buyer or veterans, Rodgers says.

Apply with at least three VA-approved lenders. Once you have an address for the property you want to buy, a lender will provide a Loan Estimate, which spells out the terms, the estimated monthly payment and closing costs, and the annual percentage rate — your interest rate including fees. Compare Loan Estimates from different lenders to choose the best loan for you.

Like other mortgages, VA loans have closing costs, which are fees charged to cover services and expenses such as the appraisal, inspection, title and origination fees. Closing costs typically run from 2% to 5% of the loan amount and are detailed in the Loan Estimate.

Here are the options if you can't pay these costs upfront:

Though VA loans don’t require a down payment in most cases, you'll still need some cash to buy a home. Here's why:

Lenders will review your cash savings to make sure you're financially stable enough to ride out any hurdles, such as unexpected expenses, after buying the home, says Anthony "TJ" Powell, executive vice president of AAFMAA Mortgage Services, a subsidiary of the American Armed Forces Mutual Aid Association. "A lender will want the applicant to show that they have the ability to and are not living paycheck-to-paycheck."

You'll need some cash for earnest money when making an offer on a house. Earnest money is a deposit that shows the seller you're serious about buying the property. The money is applied toward the purchase, returned to you at closing, or forfeited if you back out of the deal without a valid reason. The earnest money is usually about 1% to 3% of the loan amount, but can vary widely depending on the market.

You'll need some cash for moving, home maintenance, furniture and other expenses that come with homeownership. "A new home purchase is stressful for a buyer, and financial stress will just add to an overwhelming feeling," Powell says. "Having cash savings will lessen the stress and make the home buying experience easier."

An agent who has experience working with military buyers will also understand your unique housing needs. Rodgers, who was wounded in action when serving in the U.S. Army Special Forces in Afghanistan, helps each of his buyers create an "exit plan" for selling or renting out the property if they have to relocate later.

Interview a few agents and ask about their experience serving buyers using VA loans and any extra training they've completed, such as the National Association of Realtors’ "military relocation professional" certification. Don't assume agents have VA loan expertise just because they served in the military, Rodgers says.

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