Using a VA Loan as a First Time Home Buyer
Posted on: March 9, 2018
In the current housing market, first time home buyers have a lot of reasons to be hesitant. Home prices are at all-time highs in many areas around the country, and the shortage of available housing isn’t helping.
For first time buyers, the timing could seem all wrong. However, plenty of first time home buyers are finding houses, and they’re doing it in an affordable way.
Any first time buyer who is eligible for a VA loan is in luck. This program is one of the most cost-effective ways to buy a home, and if it’s your first time using the program, you can save some additional money.
Reasons first time home buyers don’t purchase a home
There are plenty of individual reasons why first time home buyers don’t think they’re ready. It may not feel like a good time for some, and others are concerned about the commitment – after all, buying a home is likely the biggest purchase a first time buyer has ever made.
But when you look closer, there are three main reasons why people are hesitant to purchase their first house:
- They don’t feel they’ve saved enough money
- They don’t think their credit is strong enough
- They’re concerned about how their student loans and debt will impact the loan
These are legitimate concerns, but the VA loan can lay them all to rest.
Why VA loans make sense
For first time home buyers, there are a handful of reasons that VA loans make sense. Not only is a VA loan likely a better option than other loan programs, but some home buyers that don’t qualify for other programs may see their home buying dreams come true through this loan program.
One of the most well-known benefits of a VA loan is that you aren’t required to make a downpayment. This helps with the first concern first time buyers have of not having enough money saved. With a lower downpayment – or no downpayment at all – saving for a home becomes a lot easier.
No credit requirement
VA loans can get approved with credit scores as low as 620, and the higher the credit score, the better the mortgage rate. Not many loan programs accept buyers with credit below 680, so this is incredibly helpful for any first time buyers that are still building their credit or pushing it higher.
No mortgage insurance
If you get a conventional mortgage or an FHA loan and put down less than 20 percent, you’ll be forced to pay either private mortgage insurance (PMI) or mortgage insurance premiums (MIP). Both push your closing costs and monthly payments higher.
But the VA guarantees this loan program, so no type of insurance is necessary. This pushes monthly payments lower, making it easier to afford a home with student loans or other debt.
Lower funding charges for first time buyers
Funding charges occur when you purchase a home. It’s a one-time payment to help purchase the home.
The funding fee to re-use a VA loan is 3.6% of the loan amount or $3,600 for each $100,000 borrowed. However, first time home buyers get a funding charge of just 2.3%. This reduced the upfront costs, and it’s available specifically for first time buyers.
Where to start
The first step to getting a VA loan is to get a certificate of eligibility (COE). This can be completed online through the VA benefits website.
After, home buyers are going to want to connect with lenders. Different lenders offer different loan terms and rates, so finding the right lender is an important step.
You can get connected with multiple lenders by filling out a small form to let them know more about yourself.
The most important thing for first time home buyers to keep in mind when finding a lender is to pick someone with VA experience. This will make the process go much smoother since they’ll be able to guide you along the way.
Buying a home might seem scary but using a VA loan is perhaps the best way a first time buyer can purchase a house.