What Is a VA Loan? How Do You Qualify? What Are the Closing Costs?

By Wes Stolsek, REALTOR®

OMNI Homes International

520-404-9773

www.wesleystolsek.com

One of the greatest benefits available to those who have served our country is the opportunity to purchase a home using a VA Home Loan. Unfortunately, many eligible veterans and active-duty service members never take advantage of this outstanding benefit because they don't fully understand how it works.

If you have served in the military—or are currently serving—this guide will explain what a VA loan is, how to qualify, and what costs you should expect when buying a home.

What Is a VA Loan?

A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs (VA). The VA does not lend money directly in most cases. Instead, it guarantees a portion of the loan made by approved private lenders, reducing the lender's risk and making homeownership more affordable for eligible borrowers.

Because of this guarantee, VA loans often offer some of the best mortgage terms available.

Benefits of a VA Loan

VA loans offer several advantages over conventional financing:

• No down payment required for most qualified buyers

• No private mortgage insurance (PMI)

• Competitive interest rates

• More flexible credit guidelines than many conventional loans

• Lower monthly payments because there is no PMI

• Limited closing costs that veterans may be charged

• The ability to finance certain costs into the loan

• Options for refinancing in the future through VA programs

For many buyers, these benefits make purchasing a home much more affordable.

Who Qualifies for a VA Loan?

Eligibility generally includes:

• Active-duty military personnel

• Veterans

• National Guard members

• Reserve members

• Certain surviving spouses of deceased service members

Eligibility depends on your length and type of military service.

Most borrowers will obtain a Certificate of Eligibility (COE), which verifies they qualify for VA benefits. Your lender can usually obtain this electronically in just a few minutes.

Credit and Income Requirements

Although the VA does not establish a minimum credit score, individual lenders do.

Most lenders generally prefer:

• Credit score of approximately 620 or higher

• Stable employment or reliable income

• Acceptable debt-to-income ratio

• Ability to demonstrate repayment ability

Every lender has slightly different underwriting guidelines.

What Can You Buy?

VA loans may be used to purchase:

• Single-family homes

• New construction homes

• VA-approved condominiums

• Certain manufactured homes that meet VA guidelines

• Multi-family properties (up to four units) if the borrower occupies one unit as their primary residence

VA loans are intended for primary residences, not vacation homes or investment properties.

What Are the Closing Costs?

Many buyers mistakenly believe VA loans have no closing costs. While the VA limits certain fees, there are still costs associated with purchasing a home.

Typical closing costs may include:

Loan Origination Fee

Charged by the lender for processing the loan.

Appraisal Fee

The VA requires an appraisal to determine market value and verify the property meets VA Minimum Property Requirements (MPRs).

Credit Report Fee

Title Insurance

Escrow and Settlement Fees

Recording Fees

Homeowners Insurance

Prepaid Property Taxes

Interest Prepaid to Closing

The VA Funding Fee

Most VA borrowers pay a VA Funding Fee, which helps keep the program available for future veterans.

The amount depends on several factors:

• First-time or subsequent use

• Down payment amount (if any)

• Military category

• Whether the borrower has a VA disability rating

Many veterans receiving VA disability compensation—or qualifying surviving spouses—are exempt from paying the funding fee.

The funding fee can usually be financed into the loan, reducing the amount of cash needed at closing.

Can the Seller Help Pay Closing Costs?

Yes.

One of the advantages of VA financing is that sellers may contribute toward a buyer's closing costs, subject to VA rules and negotiated contract terms.

Depending on market conditions, seller concessions can significantly reduce the amount of money the buyer needs to bring to closing.

Is a Home Inspection Required?

A VA appraisal is not the same as a home inspection.

While the VA requires an appraisal, I strongly recommend every buyer also obtain a professional home inspection. A licensed home inspector can identify issues with:

• Roofing

• Plumbing

• Electrical systems

• HVAC

• Foundation

• Appliances

• Structural components

A home inspection provides valuable peace of mind before you finalize your purchase.

Why Work With an Experienced REALTOR®?

Buying a home is one of the largest financial decisions most people will ever make. Working with a REALTOR® who understands the VA loan process can help make the experience smoother and less stressful.

As your REALTOR®, I will:

• Help determine whether a home is likely to meet VA property requirements

• Negotiate favorable contract terms

• Coordinate with your lender, title company, and inspectors

• Help you understand every step of the transaction

• Advocate for your best interests from contract to closing

My goal is to make your home-buying experience as smooth and successful as possible.