VA-backed home loans: don’t miss out on this important benefit

February 10, 2021

I first learned about VA home loans while I was still active-duty military, and was reminded of this benefit as part of my separation briefings when I retired. VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA doesn’t actually make the loan, but guarantees a portion of the loan, enabling the lender to provide you with more favorable terms. Apart from the Texas Veterans Land Board loan program (please see my other blog for that program), I know of no better loan programs for veterans.

Aside from being a veteran, there are some other requirements to be eligible for a VA home loan, including:

·      You must qualify for a VA-backed home loan Certificate of Eligibility (COE), and

·      Meet VA’s—and your lender’s—standards for credit, income, and any other requirements, and

·      Will live in the home you’re buying with the loan

 Find out if you qualify for a VA-backed home loan Certificate of Eligibility (COE)

So, what are the benefits of getting a VA-backed purchase loan? Here are the biggest ones:

·      No down payment as long as the sales price isn’t higher than the home’s appraised value (the value set for the home after an expert reviews the property)

·      Better terms and interest rates than other loans from private banks, mortgage companies, or credit unions (also called lenders)

·      The ability to borrow up to the Fannie Mae/Freddie Mac conforming loan limit on a no-down-payment loan in most areas—and more in some high-cost counties. You can borrow more than this amount if you want to make a down payment.
Learn about VA home loan limits

·      No need for private mortgage insurance (PMI) or mortgage insurance premiums (MIP) PMI is a type of insurance that protects the lender if you end up not being able to pay your mortgage. It’s usually required on conventional loans if you make a down payment of less than 20% of the total mortgage amount. MIP is what the Federal Housing Administration (FHA) requires you to pay to self-insure an FHA loan against future loss.

·      Fewer closing costs, which may be paid by the seller

·      No penalty fee if you pay the loan off early

Application for a VA-backed home loan is pretty straight forward:

VA loans are obtained through a lender of your choice once you obtain a Certificate of Eligibility (COE). You can obtain a COE through eBenefits, by mail, and often through your lender. Learn More

Heard of the Texas Veteran’s Land Board? It could save you a lot of money.

I can’t tell you how many times I’ve talked to veterans who have never heard of the Texas Veteran’s Land Board (VLB). It could be because it doesn’t get a lot of airtime, or it could be that their real estate agents simply don’t know about it. In the end, these veterans wind up getting loans at a higher interest rate than they would have with a loan by the VLB. Almost every real estate agent who helped me buy homes had never heard of it, and it was by luck that a loan officer (a Vietnam vet) told me about it when I bought my second home. He prepared the loan package for me and even he was shocked when he saw how much lower my rate would be. Since I was not only a vet, but a disabled Vietnam-era vet, my rate went down even further, to the lowest he had seen in a long time.

In 1983, the Legislature created the VLB Veterans Housing Assistance Program (VHAP), to aid Texas Veterans in purchasing a home. Eligible Texas Veterans and Military Members have an opportunity to purchase a home with a competitive, low-interest loan with little or no down payment. Veterans, Military Members and their spouses may receive up to $548,250 on a fixed-rate loan for 15, 20, 25 or 30 year terms*. Veterans with a VA service-connected disability rating of 30% or greater qualify for a discounted interest rate. They also offer land loans and home improvement loans, but we’ll focus on the home loans in this article.

Ready for more? There are seven steps involved in getting a VLB loan:

1.     Review VLB home loan terms and conditions online

2.     Ensure eligibility and residency requirements are met

3.     Gather bank and income statements, DD214 and other financial documents

4.     Pick a VLB participating lender by county to get pre-qualified

5.     Find your dream home

6.     Complete required documentation

7.     Pick up your home keys at closing

To be eligible for VLB loan programs, Veterans and Military Members must be:

• At least 18 years of age.

• A bona fide and legal resident of Texas on the date of application and meet one of the following service criteria:

  • An active-duty Military Member.

  • A member of the Texas National Guard.

  • A reserve component Military Member having completed 20 qualifying years for retirement.

  • A Veteran having served at least 90 active-duty days unless discharged sooner due to a service-connected disability and not discharged dishonorably.

  • A surviving spouse of a Veteran listed as missing in action or whose death was service connected.

If you haven’t already done so, click here for everything you need to know about the VLB.