Written By: Abby Hubbard

Two people signing an agreement to purchase a home

In today’s housing market, the search for your forever-home or apartment just got a lot more complicated and expensive. In some regions, homes are going for astronomical prices, way above their market value. Sweet and thoughtful letters of intent will not cut it in today’s real estate landscape. The good news for servicemembers is that the search can be simplified and more cost effective when using the resources that the United States Department of Veteran Affairs (VA) has provided.

Servicemembers are eligible to apply for a U.S. Veterans Affairs Purchase Loan. Before making a financial decision on whether to rent, lease, or buy, servicemembers should strongly consider all of their resources and gather information on the VA Purchase Loan. The benefits of purchasing a home with a VA-backed purchase loan are extensive. These loans

  • do not require a down payment as long as the home’s sale price is not higher than the appraisal, 
  • can offer better terms and interest rates than other loans, 
  • will often have fewer closing costs and will offer no penalty fees for paying the loan off early, 
  • eliminate the need for private mortgage insurance (PMI) or mortgage insurance premiums (MIP). (PMI is an insurance used to protect lenders if the homeowner defaults. Typically, this type of insurance is required if you do not make a sufficient down payment or make a down payment less than twenty percent of the total mortgage amount. MIP is similar, but it is associated specifically with Federal Housing Association (FHA) loans. A homeowner must pay the MIP of their home upfront to protect the FHA against loss.)
  • offer services to help servicemembers manage monthly payments, so they do not foreclose on their homes. 

Servicemembers are confirmed eligible to apply for a VA Purchase Loan with their active-duty status and other criteria and can apply for a Certification of Eligibility (COE) online using eBenefits on the U.S. Department of Veterans Affairs’ official website. In order to apply, servicemembers will need a letter from their commander or personnel officer containing the following information: 

  • full name
  • social security number
  • date of birth
  • the date entered duty
  • the duration of any lost time 
  • the name of the command providing the information. 

While online is most popular, they can also apply via mail or using the Web LGY system. This is the first step in order to get a VA direct or VA-backed home loan. If approved by the VA, any lender (no matter if they are a private bank or mortgage company), will request a VA appraisal of the particular house. This does not guarantee servicemembers will receive the loan; it only estimates the home’s current market value. Once the lender reviews the appraisal, credit, and respective income information, the application will be accepted or rejected. If approved, the lender will help the applicant secure a company to obtain titling granting services. This is also known as “closing” during the housing purchase period.

Interested servicemembers should begin the process soon and start to fill out paperwork. The VA Form 26-1800 is the form they will need to complete the hunt for a new home. This could be a longer process due to the many different moving parts at the VA and the whirlwind experience that comes with first-time home buying. The VA has provided a brief step-by-step guide to help service members understand the VA-backed loan process.

 

The FINRA Foundation Military Spouse Fellowship program provides military spouses the opportunity to earn the AFC® (Accredited Financial Counselor®) certification—while providing financial counseling and education to the military community. Interested and want to learn more? Click here!

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