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7 Things You Need to Know About Your VA Loan Benefit

One of the amazing benefits of military service is the use of your Veteran’s Administration Home Loan! Without a VA loan, many service members would not have the ability to purchase a home.

Here are 7 things you need to know about your VA Loan Benefit.

1.You can use it more than once. 

A VA loan isn’t good for just one use! It can be used multiple times, but each time you use your benefit you will incur a funding fee. The funding fee is based on the purchase price, percentage down (if any) and whether it was a first or subsequent use. Veterans with a service-related disability of 10% or more are typically exempt from the VA funding fee.

2. You will need cash funds for a binder deposit/earnest money, home inspection and closing costs.

When many people think of a VA loan, they think “$0 down.” While this is true when when it comes financing, there are other costs to think about when using a VA loan to purchase a home. The first being a binder deposit or earnest money deposit (EMD). This deposit is what binds you to the transaction. Depending on your location, the deposit can range from 1-3% of the purchase price. There is no standard amount. This is negotiated and written as part of your offer.

The second fee you will need to think about is a home inspection. This is completely optional, but highly recommended. Home inspections also vary in price, but are usually between $300-600.

Another fee you will incur is for the appraisal. Typically lenders will take this payment via credit card. Some lenders reimburse this fee as a benefit to military buyers. Ask your lender!

The final thing you will need to budget for is closing costs. These can run up to 3% of the purchase price and include your recording fees, title insurance, etc. Depending on your area and the market, you can ask the seller to cover a portion of your closing costs or you can also talk your lender about financing them.

3. Your VA funding fee can be included into the loan.

Your funding fee is different with every purchase. The funding fee decreases as your down payment increases. The funding fee can range  from 1.25-3.3% of the purchase price. You can view the VA Funding Fee chart here.  

4. You can spend more than the VA loan limit.

Each county has a VA loan limit, and it varies nationwide. You can still purchase a home above the loan limit for that county, just be prepared to come out of pocket for the difference. You will be required to pay 25% of the difference between the purchase price and the loan limit. Click here for a list of loan limits by county. 

5. The house must pass VA requirements including being termite free. 

In order for the loan to be approved, the VA appraisal must meet value and the home must be livable and safe. This is why it is sometimes challenging to try to use your VA loan on a foreclosure or as-is property. The home must also be termite free and have a clear WDO (wood destroying organisms) report. You can request to have the seller pay for this inspection and report.

6. You must occupy the home as your primary residence.

Within 60 days of closing, you must occupy the home as your primary residence. However, if you get orders to PCS or deploy, you are able to rent your home. 

7. VA loans typically carry a lower interest rate. 

Because VA loans are backed by the government, they typically have lower interest rates than conventional loans. 

What else would you like to know about VA Loans? Thank you to Jennifer Weigl, with The Federal Savings Bank, for her input on this post! She is able to lend in all 50 states! 

Are you purchasing a home soon? Be sure to visit our Military Moms Blog Real Estate Guide to find the perfect, military-friendly agent! 

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