Are you a veteran or active-duty service member looking to buy a home? If so, you may be eligible for a VA loan – a VA mortgage option that can save you a significant amount of money throughout the home buying process.
If you work with a company like ARC Relocation, you can potentially save even more through their realtor rebate program that puts cash back in your pocket after closing.
What Is a VA Loan?
A VA military home loan is a type of mortgage loan that is backed by the U.S. Department of Veterans Affairs (VA). It is designed to help active-duty military personnel, veterans, and eligible surviving spouses purchase homes with favorable terms and low-cost or no-cost options compared to traditional mortgages.
The VA does not directly lend money for these mortgages. Instead, private lenders like banks, credit unions, and mortgage companies issue the loans while the VA guarantees a portion of the loan amount. This guarantee protects lenders against losses if the borrower defaults, making them more willing to provide affordable financing to eligible borrowers.
Benefits of a VA Home Loan
VA loans offer several significant advantages over conventional mortgages, making them an attractive option for eligible borrowers looking to purchase a home. Here are some of the key benefits that can save you substantial money:
Closing Cost Limits
One of the biggest advantages of a VA loan is that the VA limits the amount of allowable closing costs that borrowers can pay.
This cap on fees can save you thousands of dollars when compared to the closing costs associated with a traditional mortgage. Typical closing costs might include things like the lender’s origination fee, appraisal fee, credit report fee, and more.
Lower Interest Rates
VA loans typically offer lower interest rates than conventional mortgage loans. This lower rate can result in significant savings over the life of your loan. Even a slightly lower interest rate can translate to tens of thousands of dollars in savings for the borrower.
0% Down Payment
Perhaps the most attractive feature of a VA loan is that it does not require any down payment, as long as the sales price of the home is not higher than its appraised value. This allows qualified buyers to purchase a home without having to save up a substantial amount of money for a down payment, which can be a major barrier to homeownership for many.
Flexible Credit Guidelines
The VA has more flexible credit requirements and guidelines than many conventional lenders. While most lenders have strict credit score cutoffs, the VA takes a more holistic approach when evaluating a borrower’s creditworthiness. This makes it easier for those with less-than-perfect credit histories to qualify for a mortgage.
No Private Mortgage Insurance
With conventional mortgages, borrowers who make a down payment of less than 20% are typically required to pay private mortgage insurance (PMI). This insurance protects the lender in case of default but can add hundreds of dollars to your monthly mortgage payment. VA loans do not require any PMI, resulting in lower overall housing costs.
VA Loan Eligibility
To be eligible for a VA home loan, you must meet specific service requirements set by the Department of Veterans Affairs. Your eligibility criteria and the VA loan requirements you must meet can vary depending on whether you are currently serving on active duty or are a veteran.
Veterans
If you are a veteran of the U.S. Armed Forces looking to move, you generally need to have served at least 181 days of active duty during peacetime or 90 consecutive days during wartime to be eligible for a VA loan. You must also have been discharged under conditions other than dishonorable.
However, there are some exceptions to these minimum service VA loan requirements. For example, if you were discharged due to a service-connected disability, you may still be eligible with less active duty time served.
Service Members
If you are currently serving on active duty in the military, you may be eligible for a VA loan after serving at least 181 continuous days. However, there are some additional VA loan requirements and exceptions based on your specific circumstances.
For example, you may be eligible after serving just 90 days if you were deployed or are a member of the National Guard or Reserves who served at least 90 days of active service during wartime. The VA also has special eligibility provisions for certain scenarios like being a prisoner of war or receiving a Purple Heart.
It’s important to note that eligibility requirements can change over time, so it’s best to consult with a VA-approved lender or the VA directly to determine if you meet the current service requirements.
How VA Loans Compare
While VA loans offer many benefits, it’s helpful to understand how they stack up against other popular mortgage options like conventional loans and FHA loans. Here’s a quick comparison:
VA loans typically offer lower VA home interest rates and more flexible credit requirements than conventional loans from banks and private lenders. Additionally, conventional loans require private mortgage insurance if you put down less than 20%, while VA loans never require PMI.
Compared to FHA loans, which are insured by the Federal Housing Administration and allow for low down payments, VA loans generally have lower overall costs.
While FHA loans allow down payments as low as 3.5%, they require both an upfront mortgage insurance premium and ongoing annual premiums, which can add significant costs over the life of the loan. VA loans require no mortgage insurance at all.
| Loan Type | Interest Rates | Credit Requirements | PMI Requirement | Overall Costs | Down Payment |
| VA Loans | Lower | More Flexible | No PMI | Generally Lower | Not specified |
| Conventional Loans | Higher | Less Flexible | PMI required if down payment is less than 20% | Varies | At least 20% to avoid PMI |
| FHA Loans | Varies | Varies | Upfront and annual premiums | Higher due to premiums | As low as 3.5% |
This table provides a clear comparison of key features such as interest rates, credit requirements, PMI (Private Mortgage Insurance) requirements, overall costs, and down payment expectations for each loan type.
In many cases, VA loans can be the most affordable mortgage option available – especially for those with lower credit scores or limited funds for a down payment.
Types of Veteran Loans
The VA offers several different types of home loans to meet the diverse needs of eligible borrowers. Here’s an overview of some of the most common VA loan options:
VA Interest Rate Reduction Refinance Loan
This type of VA loan, sometimes called a VA Streamline Refinance, allows homeowners who already have an existing VA loan to refinance their mortgage to take advantage of lower interest rates. The IRRRL typically involves less documentation and underwriting than a standard refinance.
An IRRRL can potentially lower your monthly mortgage payments and save you thousands over the life of the loan by securing a lower interest rate. However, you cannot take cash out with this refinance option.
VA Purchase Loan
The VA Purchase Loan, often referred to as a VA home loan, is the most widely used type of VA loan. As the name implies, this loan is used to finance the purchase of a primary residence for eligible borrowers.
With a VA Purchase Loan, qualified buyers can finance up to 100% of the home’s value with no down payment required, as long as the purchase price doesn’t exceed the appraised value. The VA also caps certain closing costs that the borrower is allowed to pay.
VA Energy Efficient Mortgage
The VA Energy Efficient Mortgage (EEM) is designed to allow veterans to finance the cost of energy efficiency improvements into their VA loan. This option is available for both VA Purchase Loans and VA Refinance Loans.
The EEM can cover various upgrades, such as installing energy-efficient windows, insulation, or heating and cooling systems, which can ultimately save homeowners on their utility bills and contribute to environmental conservation.
VA Cash-Out Refinance
The VA Cash-Out Refinance Loan is another valuable option that allows veterans to refinance their existing non-VA loan into a VA loan and extract cash from the home’s equity.
This can be used for various purposes like home improvements, debt consolidation, or other financial needs. It offers the benefits of a standard VA loan, such as competitive interest rates and no requirement for PMI.
How a Realtor Rebate Can Help
While VA loans already offer significant savings for eligible buyers, working with a company that provides a realtor rebate program can help you save even more money on your home purchase. The ARC Relocation Realtor Rebate Program puts cash back in your pocket after closing when you work with one of their pre-screened real estate agents.
Here’s how it works: After your home purchase is finalized, ARC Relocation will issue you a cash rebate that is a percentage of the total purchase price of the home. The exact rebate percentage can vary based on the specifics of the transaction, but rebates typically range from around 1% to 2% of the sales price.
Example of the ARC Realtor Rebate Program
Imagine you’re a veteran who has just purchased a home for $300,000 using a VA loan, and you’ve decided to work with ARC Relocation’s realtor rebate program. Let’s say the rebate percentage offered by ARC Relocation is 1.5% of the purchase price.
Here’s a simple breakdown of how the rebate would work:
- Home Purchase Price: $300,000
- Realtor Rebate Percentage: 1.5%
- Rebate Amount Calculation: $300,000 (purchase price) * 1.5% (rebate percentage) = $4,500
After the closing of your home purchase, ARC Relocation provides you with a rebate of $4,500. This amount can be used for any purpose, whether you want to furnish your new home, apply it towards your mortgage, or save it for future expenses.
The USAA Movers Advantage Program offered cash rewards to military customers and families to help them save money on moving, but it no longer exists. ARC Relocation’s Realtor Rebate Program replaces the USAA Movers Advantage Program.
It is an extra benefit on top of the VA loan advantages, enhancing your financial flexibility and providing additional savings after you’ve secured your new home.
VA Loan Requirements: FAQs
Do I need to be a first-time homebuyer to qualify for a VA loan?
No, VA loans are available to eligible borrowers regardless of whether they are first-time homebuyers or have owned a home in the past. The program is intended to support affordable homeownership for those who have served or are serving in the military.
Can I use a VA loan to purchase a vacation home or investment property?
No, VA loans can only be used to finance the purchase of a primary residence that will be occupied by the borrower. Investment properties and vacation homes do not qualify.
Can I have more than one VA loan at the same time?
Yes, in some cases it is possible to have multiple VA loans simultaneously if you still have remaining loan entitlement. However, the combined loan amounts cannot exceed the total entitlement amount, which is typically tied to the county loan limits.
Do I need to pay a funding fee for a VA loan?
The VA charges a funding fee on most VA loans to help defray the program’s costs. This upfront fee varies based on your type of service, down payment amount (if any), and whether this is your first VA loan or a subsequent one. Many borrowers opt to roll the funding fee into their overall loan amount.
Final Thoughts
VA loans offer a suite of benefits that can make home ownership more accessible and affordable for veterans and active-duty service members. With features like no down payment and no PMI, along with the potential for lower interest rates and flexible credit requirements, VA loans can be an excellent choice for eligible borrowers.
By understanding the variety of VA loan options, VA loan requirements, and leveraging additional benefits like realtor rebates, veterans can maximize their advantages and enjoy a smoother, more cost-effective path to homeownership.
If you are a veteran planning a move, ARC Relocation can help. We at ARC Relocation can help plan your move and help you transition smoothly into the next chapter of your life.
To learn more about how ARC can help you save thousands on the purchase of your home, contact us today or register for our realtor rebate program.