So, you've decided to take the plunge into home ownership. Now comes navigating the world of home loans to find the right mortgage. If you're a Veteran of the US military or an active duty service member you may qualify for a VA Home Loan. VA loans are exclusively available to current and former members of the US military and offer many benefits over conventional mortgages.
Read on to learn more about these low-cost mortgages and how to obtain one.
Step 1: Verify Your Eligibility
In order to obtain a VA home loan you must first meet the eligibility requirements, which are dependent on your military service. You may be eligible if you:
1. Served for 90 consecutive days during wartime, OR
2. Served for 181 consecutive days during peacetime, OR
3. Served for more than 6 years in the National Guard or Reserves, OR
4. Are the surviving spouse of a service member who died in the line of duty or as a result of a service-related disability.
If you meet any of the above criteria, you can start gathering the documentation needed to apply.
Step 2: Gather 4 Critical Pieces of Documentation
Several pieces of information are needed to verify your eligibility as well as your ability to repay it. These include:
1. Certificate of Eligibility (CEO). The COE is your proof to the lending institution that you meet the minimum qualifications for a VA loan. You can obtain this form through the Department of Veteran Affairs, online at the VA's e-Benefits portal, from your VA-approved lender or by mailing Form 28-1880 to the VA.
2. Credit Report. The credit report will provide the lender with information about your current financial state, such as your debts and debt repayment history. This information helps determine how much you can borrow and still be able to repay. The VA does not set a minimum credit score. Individual lenders do set a minimum credit score, but VA lending requirements are typically more relaxed than conventional requirements, which is one of the main advantages of this type of mortgage.
3. Proof of Income. You will need to provide proof of income in order to obtain a mortgage. Most lenders require the last two months of pay stubs and the last two years of tax returns or W2s to verify income. If you are applying jointly with your spouse, his or her income should be included.
4. DD-214 is the form you'll need to use to apply for your COE. This form details the conditions of your discharge and verifies that you qualify for benefits. DD-214s are provided upon discharge but new ones can be obtained from The National Archives.
Your VA lender can help you obtain these pieces of documentation if you can't do it yourself.
Step 3: Choose A VA Loan Lender
You'll need to find a FDIC-insured lender to write your loan. The FDIC backing ensures that the lending institution is following safe and sound operating practices, which reduces your risk.
Not all lenders work with VA loans and others are simply lead farms and don't manage the loans themselves, so you will need to do some research. Even among VA lenders you'll find different terms. Shop around and find the best deal for your situation. Ideally, you will want to select a lender who is FDIC insured, is a bank and focuses almost exclusively on VA loans or VA loan refinancing.
That's it! 3 simple steps and you can be on your way to purchasing a house with one of the best mortgage programs available. Go ahead, you've earned it!