If you’re a veteran thinking about purchasing a new home, you know that it’s an exciting time. Homeownership gives you the chance to build equity, improve your credit, and create a living space that’s safe for you and your family. You’ll become one of more than 19.2 million veterans who are currently homeowners across the United States.
It’s easy to get confused by the home-buying process. Whether you’re a seasoned property expert or a first-time home buyer in need of direction, your home-buying process should stay exciting and stress-free. Reference the below strategies — specifically for veterans — that can inform confident, productive real estate decisions.
1. Review and Organize Your Finances
If you’re a veteran serious about buying a home, you’ll need to get your finances together first. While there are many valuable resources out there to make the home-buying process straightforward, you’ll still need to manage your financial portfolio as you submit loan applications.
In the weeks and months before applying for a loan, gather your finances in anticipation of some pretty comprehensive application forms. First, be honest about which properties you can afford. After you determine the ideal size and price for yourself and your family, you can quickly collect the remaining financial details you’ll need.
You may need to provide all of the following financial items to a potential lender or loan provider:
- Bank statements to verify continual income;
- Proof of other financial assets and investments;
- Your living history, including the price and address of any properties you’ve purchased or rented.
If you’re applying for a loan jointly with your spouse, you may also need to present items to represent their financial history.
If you’re pursuing a VA loan, reviewing your finances also means preparing a few duty-specific details. You’ll need to identify your length of service, identify your debt-to-income ratio, and obtain your certificate of eligibility before applying.
2. Consider Costs and Look for Financial Assistance Resources
Unsurprisingly, there are a variety of costs associated with the home-buying process. Fortunately, you can leverage financial assistance programs and other resources to ease the burden of these costs.
A majority of the costs you’ll face when buying a home are from your mortgage, associated fees, and property taxes. These costs should influence the overall price of the home you can afford; you’ll incur them before, during, and after the home-buying process concludes.
Mortgages, Fees, and Taxes
During the financial planning stage of your preparation, consider outlining approximate mortgage fees, home-buying fees, and taxes. Your mortgage is an agreement between you and your lender. You will make lump payments each month, made of both the principal you owe and the interest on the loan itself.
Individual mortgage rates can vary, based on your location, financial history, and other factors. Cash-out and jumbo mortgages might hit slightly higher rates than a conventional mortgage, depending on how they are packaged. The mortgage will include fees such as the origination and appraisal costs, title insurance, as well as the cost of accessing your credit report. Property-related fees include homeowners insurance, prepaid interest, recording fees, and the real estate agent’s commission.
You might also need to pay a VA funding fee — a one-time payment made on your home loan — depending on your loan type and total loan amount.
Even after you complete the purchase of your home, you might have a few more fees to pay. These payments can include a monthly or quarterly homeowners association (HOA) fee, paid by all residents in a neighborhood. An HOA fee can cover a wide variety of shared neighborhood expenses, including landscaping, general maintenance, upkeep of a pool or communal garden, and the removal of trash and snow.
The property you purchase is also subject to property taxes. Based on the estimated value of your home over time, you’ll likely need to pay yearly or biyearly property tax installments. These payments are made in addition to your regular mortgage contributions.
Fortunately, there are a variety of resources that can limit the payments you’ll need to make. Property tax loan plans serve as an alternative to lump payments. A residential property tax loan helps homebuyers avoid foreclosure and delinquency costs.
Home-buying veterans can also qualify for a variety of homeowner-specific tax deductions, to lessen taxes due come April. Some states — including Florida and Texas — offer specific tax exemptions that help active-duty, retired, and disabled veterans afford their next home.
3. VA Home Loan and Lending Options
You’ll have several options available when it comes time to finance your home. Some veterans choose a VA loan, a mortgage program offered through the U.S. Department of Veterans Affairs. Other veterans consider a conventional loan or alternative lending options.
One of the most popular financing options for all home-buying veterans is the VA loan. If you’re an active-duty service member, a retired military member, or a widowed military spouse, you can qualify for a government-sponsored VA loan. These loans are designed to help military members purchase and benefit from property.
VA loans are slightly different from regular loans. Unlike conventional loans, VA loans can only be used to finance a primary residence. In addition, VA loans do not require a down payment. You’ll pay an upfront lending fee, but you won’t need mortgage insurance to qualify.
You can also pursue other lending options when financing a home. These include conventional loans, which are great for individuals with higher credit scores and low debt. For those who may not qualify for a conventional loan, FHA loans — which don’t require a credit score verification — can serve as a viable alternative.
4. Maintain Reliable Income
No matter the home financing option you choose, you’ll need to maintain a reliable source of income through the home-buying process. Your lender will want to see proof of stable income — typically by requesting a number of your recent pay stubs — before your loan is accepted.
Reliable income is especially important for veteran-specific loans. As one of the main factors used when determining the acceptance and amount of your VA loan, stable income should remain a particular priority when you’re looking for your next home.
In order to qualify for many financial assistance programs available for veterans, you’ll also need to prove that you’re capable of earning an income. Even though they do not require any down payment, VA loans are virtually never issued to individuals without a proven salary.
5. Use a Veteran-Friendly Real Estate Agent
Real estate agents can make a huge difference when you’re searching for a home. If you’re like many Americans, you’ll trust an experienced real estate agent to help you identify and close on your preferred home. This agent will schedule home tours, communicate with current residents, and negotiate on your behalf.
No matter where you find yourself in the home-buying process, it’s important to find a real estate agency experienced in dealing specifically with veterans. Veteran-friendly real estate agents will thoroughly understand the terms of a VA loan, sympathize with your situation, and can confidently convey your situation to sellers considering multiple offers.