Your Path to Homeownership: A Veteran’s Guide to Buying a First Home the Smart Way

Are you currently serving in the Armed Forces, or have you served in the Armed Forces for an extended period of time? Then you may already be aware that a history of service in the United States (U.S.) Armed Forces may provide you a potential advantage that is available to American veterans. In fact, first time homebuyer veteran loans are an often-cited reason many brave people join the U.S. Armed Forces in the first place.

In return for your service to our country, you may have the option to apply for a Veterans Affairs (VA) home loan. Advantages of this program, qualification standards, and more, are outlined below. Learn how you can use your access to a VA home loan to your advantage when buying a home for the first time.

Learn How a VA Home Loan Advantages America’s Veterans

There are a few key reasons why a first-time homebuyer veteran could choose a VA mortgage in order to finance the purchase of their home. According to Investopedia ®, “with VA loans, veterans, service members, and their surviving spouses can purchase homes with little to no down payment and no private mortgage insurance and generally get a competitive interest rate.”

Let’s break that down:

1. Little to no down payment on select VA loans. In the VA’s own words, “The VA home loan program has made mortgage credit available to many veterans whose loans otherwise would not have been made.” In many cases this means that you may be able to purchase a home with no down payment, or with a substantially lower payment, if you qualify for a first time homebuyer veteran
2. No private mortgage insurance. If a lender would otherwise require you to take out private mortgage insurance on your home loan, they will likely not do so if you take out a VA loan. That’s because the U.S. Department of Veterans Affairs (formerly known as the “Veterans Administration”) guarantees a portion of the VA home mortgage instead. The Department of Veterans Affairs does not typically permit the placement of private mortgage insurance on VA loans.
3. Competitive interest rates. When it comes to interest rates, the rates for VA home loans are often among the lower rate options available to qualifying borrowers. Keep in mind that factors that affect your interest rate may include your credit history, and other factors including the period of time that it will take you to pay back the loan.

Avoid Common Myths About VA Home Loans

Buying a home can be complicated, and it’s natural for a borrower to be wary of VA home loans. But just because VA home loans are guaranteed by the federal government, it may not be right to consider them complex or unwieldy. It could be the opposite. Many consumers share the view that VA home loans are not more complicated than any other government-backed home loan. VA home loans are meant to help pave a path to homeownership for the brave people who serve their country in uniform, and decades of institutional support for VA home loans has made the process as easy as possible for the people who served their country in uniform. In practice this means the VA home loan process is actually very similar to applying for home loan backed by the Federal Housing Authority (FHA).

Here’s an example of another common misconception about first time homebuyer veteran home loans. While some first-time homebuyer veterans might think that their VA loan means they are borrowing money from the VA or the federal government, the VA home loan is not necessarily issued by the government. Rather, unless they are specified as a “VA direct home loan,” VA home loans are often issued by private lenders like banks, credit unions, or mortgage companies.

(Keep in mind some lending institutions may have more experience issuing VA home loans than others. Home lenders that specialize in VA home loans are sometimes called “VA home lenders,” even though they are private institutions and not affiliated with the United States government.)

Don’t fall victim to another common misconception about first-time homeowner veterans: you may not need to have a lot of money saved up to take out a VA home loan. Whether or not you qualify for veteran housing grants of down payment assistance for veterans, many first time VA homebuyers are able to put down little to no down payment on their mortgage. This is because their mortgage is guaranteed in part by the federal government, which can help reduce risk to the lender.

A related misconception about VA home loans is that they are expensive. Many disagree with this sentiment, as there are regulations limiting the closing fees that may be charged to a VA borrower. You may have heard of the “VA funding fee,” which is considered by many consumers to be a worthy tradeoff for the many other advantages of VA home loans.

Where Can You Learn More About VA Home Loans?

No matter what stage you are at in your homebuying process, the free Learning Center presented by The Federal Savings Bank (TFSB) can help you familiarize yourself with key concepts, organize your paperwork, and strategize to make a prudent financial decision for your family.

There’s also no substitute for a referral from a source that you trust and respect. That’s why you should ask your fellow veterans or service members about their VA home loan experience. Try and find out what they liked about their VA home lender, but also be sure to ask your friends and family what they wish they had done differently when they were preparing to buy a home for the first time with a VA home loan.

A trusted loan officer should be a resource to you as well, so consider reaching out to one early in the process. Ask them questions about how a VA home loan could impact your personal financial health before you apply. Your realtor may be able to refer you to a lender their clients like to take out home mortgages with, but you are free to seek out a home lender that better fits your needs when you decide to finance your home purchase with a VA home loan.