Buying your first home on active duty may be intimidating and the jargon can be confusing, but the good news is that others have walked this path and made it through — and you will, too. Active duty service members and veterans have a secret weapon that civilians do not possess: the VA Guaranteed Loan. While the VA will not issue the loan itself, the guaranty provides the veteran with the means to obtain a loan without a down payment or mortgage insurance premiums.
First thing’s first; one must obtain a Certificate of Eligibility to prove their entitlement as per the VA fact sheet. The lender can obtain this on the veteran’s behalf, or the veteran may do it themselves through eBenefits to get started. The process may seem daunting at times, but these tips should help you along.
1. Estimate your monthly payment before you start looking at anything
A pre-approval letter determines your maximum loan amount, and is based on your credit and finances. This document may be requested from the loan officer or lender (bank) to calculate your monthly payments. You can estimate what your monthly payments will look like by using a mortgage calculator and the data contained in the pre-approval document.
Input your down payment (if any), maximum amount approved by the lender, and interest rate to have a realistic picture of what the payments are going to look like. Adjust the price of the home to determine an acceptable monthly mortgage for your situation.
2. Maintain some savings for unexpected expenses
As a new homeowner, we can guarantee that you’ll run into unexpected costs. To prepare for these, make sure you have some sort of savings cushion — even if you aren’t buying a house, you should have some savings tucked away, just in case.
When you take out a loan and buy a house, you’ll encounter all sorts of unexpected expenses, like paying a funding fee, paying for inspections, and covering closing costs. Sure, you can roll several of these fees into your loan, but that’s just going to add to debt that you’ll already spend decades paying off.
In general, you should save as much as you can, but you should have at least $6,000 – $9,000 in reserve. Worst case scenario? You don’t use it all and you’ve got some extra cash.
3. Find a realtor and lender with VA experience
If you’re diligent, you will find a realtor who is prior service and has walked a mile in your shoes. A lender like USAA (or other military-oriented lenders) can also offer a huge amount of help.
To find leads that will unite you with a realtor who understands your needs, reach out to your local military support group on Facebook for recommendations. A friendly inquiry can result in a list of individuals who have been recommended by your peers.
4. Keep your options open
After the preliminary paperwork is complete, you’ll be able to place an offer on a potential home. There are a few scenarios that can unfold here: the seller may accept your offer right away, decide to wait for another offer but not deny your offer, or send a counteroffer. It is absolutely essential to know that you may place offers on several homes at once.
However, once you have an offer accepted by a seller, you are obligated by contract (as per the purchase agreement) to not place new offers on other homes.