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VA Loans for Active Duty Military

by MilitaryBenefits

The Department of Veterans Affairs administers the VA loan program. As such, many active duty military members don’t know if they can also use these loans. Yes, active troops can absolutely use the VA loan. And, we’ll use this article to outline how VA loans for active duty military work.

VA loans For Active Duty MilitarySpecifically, we’ll discuss the following:

  • VA Loan Overview
  • VA Loan Eligibility Requirements for Active Duty Military
  • Using Active Duty BAH to Qualify for a VA Loan
  • Considerations when Nearing End of Active Duty Service
  • Meeting VA Loan Occupancy Requirements
  • Final Thoughts

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VA Loan Overview

The VA loan offers active duty military members an incredible path to homeownership. Though administered by the Department of Veterans Affairs, these loans are actually originated by VA-approved lenders (e.g. banks, credit unions, and mortgage companies).

The VA guarantees a portion of each of these loans. This means that, if a borrower defaults, the VA will repay the lender a portion of the outstanding loan balance. This reduces lender risk and means they can offer borrowers the following outstanding terms:

  • No down payment required
  • No private mortgage insurance (PMI) required
  • Low interest rates
  • Streamlined refinancing option via the Interest Rate Reduction Refinance Loan (IRRRL)

VA Loan Eligibility Requirements for Active Duty Military

To qualify for the VA loan, active duty military members must meet certain minimum service requirements. But, most service members will meet this threshold shortly after beginning their first tours, as active troops must only complete 90 continuous days of service to qualify.

However, active service members also need to understand that VA loan eligibility does not equal VA loan approval. As outlined above, the VA guarantees loans – it doesn’t actually issue them. Individual lenders provide the loans, and active duty borrowers need to meet the loan requirements established by these lenders. This means that, in addition to VA loan eligibility, veterans need to have the income, credit scores, and other financial requirements necessary to qualify for a loan.

Simply put, just because the VA says you have VA loan eligibility does not mean that a lender will actually issue you one. But, if you understand the information in the next three sections, you’ll increase your chances of qualifying for a VA loan as an active duty service member.

Using Active Duty BAH to Qualify for a VA Loan

When you apply for any home loan, you’ll need to demonstrate that you have enough income to make your monthly mortgage payments. And, lenders confirm this through a metric known as debt-to-income ratio, or DTI. They calculate this by adding up all of your monthly debt payments – including your future mortgage payments – and dividing them by your gross (pre-tax) income.

For example, assume you have $200 in monthly car loan payments, and your future mortgage payment totals $1,300 per month. Now, assume you have $5,000 in gross monthly income. In this scenario, you’d have a DTI of 30% ($1,500 in monthly debt payments divided by $5,000 in income).

Generally speaking, the VA recommends DTI ratios less than 41%. But, active duty service members can use their basic allowance for housing (BAH) towards DTI requirements. In other words, lenders will count both your military base pay and your BAH when they calculate DTI.

This BAH inclusion provides active troops significantly more buying power. Continuing the above example, assume that, of $5,000 in monthly income, $3,500 was military base pay and $1,500 BAH. Without BAH, this buyer would have a DTI of 43% ($1,500 / $3,500), which likely wouldn’t meet lender requirements. But, by adding $1,500 in BAH to gross income, that DTI drops to 30%, well within lender standards for VA loans.

To consider your BAH in gross income, lenders will typically require copies of your Leave and Earnings Statement, or LES. If unable to access a copy online, your unit admin shop will provide one for you.

Considerations when Nearing End of Active Duty Service

Active troops nearing the end of their service face additional requirements when using a VA loan. As stated, before approving a VA loan, lenders want to make sure that you can make your monthly payments. If you’re nearing the end of military service, you’re also nearing the end of military paychecks. This concerns lenders, and they’ll want some guarantees that you can continue making loan payments.

According to VA guidelines, lenders must “identify service members who are within 12 months of release from active duty or end of contract term.” If within this time period, lenders must then determine whether the loan applicant A) plans on reenlisting, and B) is authorized to reenlist. To meet this requirement, lenders will ask for one of the following items:

  • Documentation that the service member has already reenlisted or extended his or her service beyond 12 months from the loan closing date.
  • If not reenlisting, the service member must provide a valid civilian job offer, to include starting date and pay.
  • If planning on reenlisting, the service member must provide a signed statement that he or she plans on enlisting or extending service beyond 12 months from the loan closing date.

Borrowers in this final category must provide an additional statement from their commanding officer. This statement must declare that the loan applicant is eligible to reenlist and that no reason currently exists to deny this reenlistment request.

Meeting VA Loan Occupancy Requirements

The VA loan program exists to promote homeownership. As such, active duty troops can only use these loans to purchase primary residences, not vacation homes or investment properties. To enforce this, the VA has an occupancy requirement. This requirement states that buyers must A) occupy their homes within 60 days of closing, and B) live there as a primary residence for at least one year.

However, this can pose a challenge for many active service members, especially ones on deployment. Fortunately, the VA offers a spousal exception. If the service member cannot meet the occupancy requirements, the VA will still approve the loan so long as the spouse can.

For example, assume a service member stationed in California receives orders to a base in Virginia. Frequently, military spouses – especially ones with children – will move in advance of their active duty spouses to buy and move into a new home. In this example, a military member could use VA loan benefits to purchase a home in Virginia, even if he or she won’t transfer there until after the 60-day period. But, to do this, the spouse must move into the new Virginia home during that 60-day post-closing window.

Final Thoughts

The VA loan is not just for veterans. Most active duty military members qualify for this outstanding loan program, as well. And, by understanding the unique aspects of applying for a VA loan while on active duty, service members can significantly increase the likelihood of receiving lender approval.


About The AuthorMaurice “Chipp” Naylon spent nine years as an infantry officer in the Marine Corps. He is currently a licensed CPA specializing in real estate development and accounting.


Related Articles
Should You Buy A Home While On Active Duty VA Loan Occupancy Requirements
How Long Does a VA Loan Take to Close? VA Loan Prequalification
VA Home Loans: How to Get Started VA Home Loan Options Overview

What Sellers Should Know About VA Loans

by MilitaryBenefits

VA loans provide veterans and active service members an outstanding homebuying option. But, what about from a seller’s perspective? How does selling a home change when working with a VA loan buyer? We’ll use this article to answer these questions, outlining what sellers should know about VA loans.

What Sellers Should Know About VA LoansSpecifically, we’ll discuss the following:

  • VA Loan Overview
  • Pros of Selling to VA Loan Buyers
  • Cons of Selling to VA Loan Buyers
  • Supporting Veteran Homeownership
  • Final Thoughts

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VA Loan Overview

The VA loan program is administered by the Department of Veterans Affairs, but loans are actually originated by VA-approved lenders (e.g. banks, credit unions, and mortgage companies). With this system, the VA guarantees VA loans. If a borrower defaults, the VA will refund a portion of the outstanding loan balance to the lender.

This VA insurance allows lenders to provide outstanding terms for VA loans. And, for sellers, the most important thing to understand about VA loans is how good of a mortgage product they are for qualified borrowers. This high-quality nature means that, if dealing with a veteran buyer, he or she will likely use the VA loan. Of note, VA loans include the following outstanding characteristics:

  • No down payment required
  • No private mortgage insurance (PMI) required
  • Low interest rates
  • Streamlined refinancing option via the Interest Rate Reduction Refinance Loan (IRRRL)

Generally speaking, the process of selling to a VA loan buyer parallels selling to any buyer. But, certain key differences exist that sellers should understand. Accordingly, we’ll use the rest of this article to outline the pros and cons of working with VA loan buyers as compared to buyers using conventional loans.

Pros of Selling to VA Loan Buyers

The following characteristics of VA loans make them easier to work with from a seller’s perspective:

  • Less stringent underwriting criteria: Due to the fact that the government guarantees VA loans, VA-approved lenders can use looser underwriting criteria. Typically, borrowers can qualify with lower credit scores and higher debt-to-income ratios with a VA loan relative to a conventional one. This means that, comparing two buyers with equal financial profiles, the one with a VA loan will have an easier time qualifying for a loan than the one using a conventional loan.
  • More reliable closing statistics: Many people – incorrectly – believe that VA loans are more difficult to close than conventional ones. While these loans do require some extra steps, they have successfully closed at a rate higher than their conventional counterparts over the past five years. No closing is guaranteed. But, this fact should provide sellers confidence in the likelihood of closing with a VA home loan buyer.
  • Increased purchasing power: With a conventional loan, buyers need between 3% to 20% down payments. Realistically, putting this cash together poses an insurmountable obstacle to many potential buyers, even if they have qualifying income and credit. On the other hand, VA loans don’t require a down payment. This means that borrowers tend to have significantly more buying power, as down payment needs do not increase with the purchase price.

Cons of Selling to VA Loan Buyers

Sellers also need to understand the elements of VA loans that make them more challenging. But, if you understand how the below items work, you’ll have a much easier time selling to a VA loan buyer.

  • VA Minimum Property Requirements (MPRs): The VA loan program exists to promote homeownership for veterans and active service members. Accordingly, the VA mandates that properties have baseline levels of habitability. In VA parlance, homes need to be safe, sound, and sanitary. And, to meet these objectives, the VA has established MPRs that homes must meet in order to qualify for a VA loan. If a home fails an MPR, the VA will not approve the loan. For sellers who don’t understand this process, MPRs can cause an unpleasant surprise during the closing process.
  • VA appraisal: Related to MPRs, VA loan buyers must have a VA appraisal completed. In addition to confirming property value, this appraisal will review a property for MPR compliance. Following the walk-through, the appraiser will send a final report to the VA for review. If the report flags any MPR violations, the VA will not approve the loan until either the buyer or seller resolves these issues.

NOTE: If selling a home in an area with high veteran and active military populations, there’s a good chance you’ll need to deal with MPRs and VA appraisals. Many real estate agents specialize in VA loan purchases, and they can be a great resource for VA compliance. When you use a listing agent who’s familiar with the VA loan process, he or she can make sure your home is as ready as possible for the VA appraisal process. This can save you a ton of headaches during the closing process.

  • Power of attorney potential: This is less a con and more a “be aware of” for sellers. Inherently, military members using the VA loan have an increased likelihood of travel and deployment. Accordingly, it’s not uncommon for a service member to close on a VA loan via power of attorney. For the seller, this should largely be transparent. But, you should be aware that it’s a possibility that someone besides the actual buyer will close in his or her stead.

Lastly, we need to dispel a rumor about VA loans. Many people argue that VA loans take longer to close, making working with these buyers more difficult. Realistically, VA loans and conventional loans both close on an average of 40 to 50 days from the signed contract. As a result, sellers should not consider closing time a con to working with VA loan buyers.

Supporting Veteran Homeownership

When you sell to a VA loan buyer, you support veteran or active military homeownership. This provides no practical financial benefit to sellers. But, you can certainly argue that supporting veteran homeownership is still a good thing.

And, when you sell to a VA loan buyer, you know that they’ll actually live in the house. The VA home loan exists to support veteran homeownership – not investing. Consequently, the VA requires the buyers move into their home within 60 days and occupy it as their primary residence for at least a year. Simply put, when you sell to a VA buyer, you sell to someone looking for a home – not an investment property.

Once again, supporting veteran homeownership certainly doesn’t offer a financial benefit to sellers. But, it doesn’t hurt to know that, when you sell to a VA loan buyer, you’re helping someone who has served our country find a home.

Final Thoughts

In many respects, selling to a VA loan buyer is no different than selling to any buyer. But, some differences do exist. If sellers understand these differences before listing their homes, they’ll avoid potential surprises during the closing process. And, in selling to a VA loan buyer, you also have the advantage of supporting veteran homeownership, which is certainly a positive.


About The AuthorMaurice “Chipp” Naylon spent nine years as an infantry officer in the Marine Corps. He is currently a licensed CPA specializing in real estate development and accounting.


Related Articles
VA Home Loans for First Time Buyers Preparing to Sell to a VA Home Loan
VA Loans & For Sale By Owner (FSBO) How Long Does a VA Loan Take to Close?
What Is A VA Loan? VA Loan Occupancy Requirements

VA Land Loan Rules

by MilitaryBenefits

Veterans and active service members often ask about using the VA loan to purchase land. While the VA does not allow loans to purchase only land, options exist to purchase land and build a home on it. As such, we’ll use this article to outline VA land loan rules.

VA Land Loan RulesSpecifically, we’ll discuss the following:

  • VA Loan Overview
  • VA Land Loan Option 1: Simultaneous Purchase and Construction
  • VA Land Loan Option 2: Alternative Land Financing
  • VA Land Loan Option 3: Alternative Land and Construction Financing
  • VA Land Loan Eligibility Requirements
  • Final Thoughts

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VA Loan Overview

The VA loan offers veterans and active service members an incredible home buying opportunity. Administered by the Department of Veterans Affairs (VA) and issued by VA-approved lenders, the loan program provides the following terms:

  • No down payment required
  • No private mortgage insurance (PMI) required
  • Low interest rates
  • Streamlined refinancing option via the Interest Rate Reduction Refinance Loan (IRRRL)

However, the VA loan program exists to promote homeownership, not real estate investing. As a result, the VA mandates an occupancy period. After someone purchases a home with the VA loan, they generally need to live there for at least a year (rare exceptions exist to this rule).

For this reason, the VA does not allow loans to purchase land without A) property on it, or B) a plan to immediately build property. Purchasing land alone represents investing – not occupancy.

Despite this rule, options to purchase land with a VA loan do exist. But, buyers must meet certain requirements. In the following three sections, we’ll outline three options for using the VA loan to purchase land. The first option involves direct VA financing, while the second and third use indirect VA financing.

VA Land Loan Option 1: Simultaneous Purchase and Construction

According to VA guidelines, eligible borrowers can use the VA loan to purchase land and property together – not land alone. However, a minor caveat to this rule exists that lets VA borrowers buy land directly with their VA loans. Borrowers can use the VA loan to purchase land so long as they have plans to immediately build a property there. In other words, a buyer couldn’t buy a plot of land, hope for it to appreciate in value, and resell it in the future. He or she needs to purchase it with an immediate plan to build.

If eligible borrowers work with a VA-approved builder, they can apply for a combined purchase/construction loan. They’ll need to submit the formal construction plans and, upon completion, have the finished property inspected. Furthermore, the building plans must meet certain criteria. Here are the major requirements:

  • As with buying a property, you cannot build a home with more than four units. And, each unit must have its own utility connections, with the borrower/owner occupying one of them as a primary residence.
  • The property needs to be built on and affixed to a permanent foundation.
  • The property needs to conform to the VA’s MPRs, or Minimum Property Requirements. Related, the property needs to meet federal and local building requirements.
  • The land cannot be located in a flood or noise zone, near a landfill, or vulnerable to major natural disasters (e.g. landslides or earthquakes).

And, buyers will of course need to actually qualify for the VA loan, as demonstrated by their VA-issued certificate of eligibility. Additionally, the builder you partner with must have a valid VA identification.

VA Land Loan Option 2: Alternative Land Financing

The second VA land loan option represents an indirect financing method. With this approach, borrowers purchase land with an alternative means of financing (e.g. short-term loan, conventional loan, etc.). Then, borrowers use a VA construction loan (as opposed to a purchase and construction loan) to build a primary residence on that land.

With a final property built, veterans and service members can then refinance their VA construction loans into a permanent VA loan. And, this permanent loan would pay off the outstanding balance on the original land purchase and construction loans, as the VA would conduct its final appraisal based on the finished property and land together. Of note, this option also requires using a builder that the VA has approved.

This provides a great opportunity for eligible borrowers to indirectly purchase land with a VA loan. But, it requires a level of financial creativity to find a short-term financing option for purchasing land.

VA Land Loan Option 3: Alternative Land and Construction Financing

This final option also entails an indirect means of purchasing land with a VA loan.

VA construction loans can require a fair amount of administrative red tape. As a result, some borrowers choose to avoid them all together. Instead, qualified buyers can apply for a non-VA purchase/construction loan. This can be used to A) purchase a plot of land, and B) build a home on it. Assuming the finished property meets VA MPRs and acts as the borrower’s primary residence, the original loan can then be refinanced into a permanent VA loan.

This option can provide a streamlined way to purchase land with a VA loan. Specifically, borrowers don’t need to deal with any VA-related construction or land loans. Instead, they use short-term, conventional construction financing to purchase land and build a home, refinancing into a VA loan product upon completion. However, this strategy inherently relies on a knowledge of how short-term construction financing works, meaning most borrowers pursuing this option will need to do some additional research.

VA Land Loan Eligibility Requirements

With all three of the above land loan options, borrowers still need to qualify for a VA loan. And, for veterans and service members to qualify, they need to meet all of the following requirements:

  • Qualify for a VA home loan, as demonstrated by your Certificate of Eligibility (COE)
  • Meet the VA’s and lender’s standards for income, credit score, debt-to-income ratio, and any other financial requirements
  • Will live in the home – as a primary residence – you’re refinancing from A) a VA construction loan, or B) a conventional construction loan

Final Thoughts

Buying land with a VA loan is neither common nor easy. But, it can be done. If eligible veterans and service members prefer building over buying a completed property, several options exist to use a VA land loan – either directly or indirectly.


About The AuthorMaurice “Chipp” Naylon spent nine years as an infantry officer in the Marine Corps. He is currently a licensed CPA specializing in real estate development and accounting.


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VA Construction Loans Minimum Property Requirements for a VA Loan

Are VA Loans Available for Boats and RVs?

by MilitaryBenefits

Veterans and service members frequently ask: are VA loans available for boats or RVs? Unfortunately, no, you cannot use the VA loan to purchase one of these vehicles – even if you plan on living in them. But, VA loan refinance options exist to help people purchase boats or RVs. And, we’ll use this article to outline how to use this strategy.

Are VA Loans Available for Boats and RVs?Specifically, we’ll discuss the following:

  • VA Loan Overview
  • VA Loan Cash-out Refinance
  • Using VA Loan Cash-out Refinance Proceeds to Buy a Boat or RV
  • VA Cash-out Refinance Eligibility Requirements
  • Additional Considerations to This Strategy
  • Final Thoughts

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VA Loan Overview

The VA loan offers eligible veterans and service members an outstanding mortgage option. Administered by the Department of Veterans Affairs, this loan program has the following terms:

  • No down payment required
  • No private mortgage insurance (PMI) required
  • Low interest rates
  • Streamlined refinancing option via the Interest Rate Reduction Refinance Loan (IRRRL)

With these incredible terms, many eligible borrowers want to push the limits of what property qualifies for a VA loan. Of note, people frequently argue that if they live in a boat or RV, they should be able to use the VA loan to purchase these vehicles.

Unfortunately, the VA imposes strict criteria for what property does and does not qualify for VA loan financing. While these criteria can get complicated, they ultimately boil down to one disqualifying factor for boats and RVs: VA loans need to be used to purchase real property. Due to the fact that these vehicles do not possess fixed foundations, they cannot be considered real property, meaning they do not qualify for VA loan purchases.

VA Loan Cash-out Refinance

While the VA doesn’t allow direct VA loan financing to purchase a boat or RV, an alternative exists for eligible homeowners. In addition to using the VA loan to purchase homes, eligible borrowers can take advantage of the loan program’s cash-out refinance option.

This program allows eligible veterans to replace their current conventional or VA loans with a new VA loan under different terms (rate and repayment period). And, if you have equity in your home, the VA cash-out refinance, as the name suggests, allows you to refinance into a larger loan, pocketing the difference as cash.

Every VA-approved lender will offer different terms, but many will allow veterans to borrow up to 100% of their home’s current value on this refinance – not just on the original loan. According to VA guidance, without a down payment, you can borrow up to the Fannie Mae/Freddie Mac conforming loan limits for your area.

Using VA Loan Cash-out Refinance Proceeds to Buy a Boat or RV

As stated, eligible homeowners can refinance their current conventional or VA mortgages with a VA cash-out refinance loan. And, as long as you meet your area’s conforming loan limits, you can pull out cash in the amount of equity you have in the property.

For example, assume you purchased a home several years ago, and you have a current mortgage balance of $200,000. For a cash-out refinance, it doesn’t matter whether that’s a conventional or VA loan mortgage. Now, let’s say that, following a VA appraisal, your home has a current value of $300,000. This means you have $100,000 in equity in your home ($300,000 appraised value minus $200,000 mortgage balance). Accordingly, you could refinance into a VA loan up to $300,000 and put the $100,000 difference between the new and old loan amounts into your pocket as cash.

For veterans and service members who A) own homes, and B) have equity in them, this cash-out refinance offers a great strategy for indirectly financing a boat or RV. While the VA has guidelines on who qualifies for a cash-out refinance, it doesn’t tell borrowers how they can spend the cash-out proceeds. Borrowers can absolutely use these funds to buy a boat or RV.

And, you don’t need to refinance into a new 100% loan-to-value mortgage. In other words, following the above example, you could refinance into a loan smaller than your home’s $300,000 value. Let’s say the boat of your dreams costs $50,000. You could refinance into a new $250,000 VA mortgage, taking $50,000 out in cash while keeping your monthly payments lower than they would be with a $300,000 mortgage.

VA Cash-out Refinance Eligibility Requirements

Looks great – do I qualify?

For veterans to be eligible for a VA cash-out refinance, they need to meet all of the following requirements:

  • Qualify for a VA home loan, as demonstrated by your Certificate of Eligibility (COE)
  • Meet the VA’s and lender’s standards for income, credit score, debt-to-income ratio, and any other financial requirements
  • Will live in the home – as a primary residence – you’re refinancing with the cash-out loan

This final requirement poses a potential obstacle to this strategy. If veterans want to use refinance proceeds to purchase an RV or boat to live in, they will not be able to do so immediately. The VA generally requires borrowers to live in a home for at least a year following a purchase or refinance. However, with some advanced planning, this shouldn’t be an issue.

Additional Considerations to This Strategy

Just because a borrower can pursue this cash-out strategy doesn’t mean he or she should. Before using VA cash-out refinance proceeds to purchase a boat or RV, veterans and service members should think about these additional considerations:

  • Increased monthly payments: When you refinance into a larger loan, you’ll inherently have larger loan payments. Assuming 3.5% interest and a 30-year loan, the monthly principal and interest payments for a $300,000 loan will be roughly $450 more per month than a $200,000 loan.
  • Increased total interest payments: Interest represents the amount you pay to a lender for the privilege of borrowing money. As such, most borrowers want to minimize their mortgage interest payments. Over the life of a $300,000 loan with the same terms as above, borrowers will pay roughly $57,000 more in interest over the life of the loan than with a $200,000 mortgage.
  • Depreciating assets: In most situations, homes are appreciating assets, meaning they become more valuable over time. Most homeowners justify borrowing money to pay for a home based on this characteristic. Conversely, RVs and boats are depreciating assets, meaning they become less valuable over time. Borrowing money to buy something that loses its value isn’t always a wise personal finance decision.

Final Thoughts

No, you cannot use your VA loan to purchase a boat or RV. But, as this article illustrates, you can use a VA cash-out refinance on your primary residence to indirectly finance the purchase of one of these vehicles. But, before doing so, make sure you’ve balanced the associated costs of a larger loan against the benefits of owning a boat or RV.


About The AuthorMaurice “Chipp” Naylon spent nine years as an infantry officer in the Marine Corps. He is currently a licensed CPA specializing in real estate development and accounting.


Related Articles
Getting Ready to Refinance Should You Purchase A Timeshare, RV, or Vacation Home?
VA Refinance Loan Options What Can (And Can’t) You Buy With a VA Home Loan?
VA Cash-Out Refinance Guidelines VA Loan Certificate of Eligibility (COE)

Preparing to Sell to a VA Home Loan Buyer

by MilitaryBenefits

Many veterans are familiar with using the VA home loan to purchase a home. But, not as many understand loan considerations from the seller’s perspective. As such, we’ll use this article to help people preparing to sell to a VA home loan buyer.

Preparing to Sell to a VA Home Loan BuyerSpecifically, we’ll cover the following topics:

  • VA Home Loan Overview
  • Who Qualifies for the VA Home Loan?
  • Advantages of Selling to a VA Home Loan Buyer
  • Preparing to Sell to a VA Home Loan Buyer
  • Final Thoughts

{Sponsored} Veterans Can Buy a Home with $0 Down
The VA Home Loan offers $0 Down with no PMI. Find out if you’re eligible for this powerful home buying benefit. Prequalify today!

VA Home Loan Overview

Prior to selling to a VA home loan buyer, it helps to understand the basics of this loan program.

The VA home loan provides veterans and active military members an outstanding path to homeownership. The Department of Veterans Affairs (VA) administers the program but doesn’t actually issue loans. Instead, the VA works with a variety of different lenders (e.g. banks, credit unions, mortgage lenders, etc.) to guarantee VA home loans. With this guarantee, lenders face less risk from borrowers defaulting. If a borrower stops repaying a loan, the VA will reimburse the lender a portion of the outstanding loan balance.

Due to this reduced risk, VA-approved lenders can offer the following tremendous benefits:

  • No down payment required
  • No private mortgage insurance (PMI) required
  • Low interest rates
  • Streamlined refinancing option via the Interest Rate Reduction Refinance Loan (IRRRL)

For sellers, it should be clear how these terms improve a VA home loan buyer’s purchasing power. Between the no-down, low-interest, and no PMI characteristics, VA buyers will qualify for a wider range of price points than similar buyers using a conventional mortgage.

Who Qualifies for the VA Home Loan?

However, sellers shouldn’t see veteran and assume a buyer qualifies for the VA home loan. Rather, the VA outlines specific eligibility criteria for who does and does not qualify for the home loan program. And, not all veterans will have access to this program.

From the seller’s perspective, the specific loan qualification criteria don’t matter. In other words, sellers don’t need to concern themselves with different VA-mandated service requirements for using the VA home loan. Veteran buyers may not want to disclose their service history to a home seller, nor should they feel obliged to disclose this information. What does matter is whether or not the VA has approved the loan eligibility of your potential buyer.

The VA confirms a buyer’s home loan eligibility with a Certificate of Eligibility, or COE. And, while sellers certainly can ask to see this COE, a better option exists. VA-approved lenders will pull veterans’ COEs for them during the loan application process. Consequently, if veterans have been pre-approved by a VA-approved lender for a VA loan, home sellers will know that they have their eligibility.

This pre-approval also provides further assurance that a veteran won’t have any trouble closing on the loan.

Advantages of Selling to a VA Home Loan Buyer

Selling to a VA home loan buyer certainly comes with some additional considerations. And, we’ll discuss these in the next section. But, sellers should also understand two key advantages to selling to these buyers. In general, these advantages outweigh any additional VA home loan requirements.

Purchasing Power

Realistically, saving enough for a down payment poses the largest obstacle to buying a home for most people. The VA home loan’s no-down quality negates this problem. Buyers using the VA home loan can afford more than most of their non-VA peers for this reason alone. And, not needing to pay PMI expands this purchasing power even further. While amounts vary, veterans can expect to save around $100 per month without this expense. This payment reduction increases the loan amount veterans can access.

Loan Closing Reliability

A myth exists that VA home loans are more difficult to close than conventional ones. This simply isn’t the case. According to mortgage provider data, over the past five years VA home loans have successfully closed at a higher rate than conventional ones. No closing is guaranteed. But, this fact should provide sellers confidence in the likelihood of successfully closing with a VA home loan buyer.

Preparing to Sell to a VA Home Loan Buyer

In many respects, preparing to sell to a VA home loan buyer parallels preparing to sell to any buyer. Accordingly, we’ll highlight the differences here. When working – or potentially working – with a VA loan, sellers should complete the following tasks.

Check Minimum Property Requirements

The VA home loan program exists to promote veteran homeownership. Consequently, the program imposes Minimum Property Requirements, or MPRs, that all properties must meet to qualify for a VA home loan. Basically, the VA wants to confirm that homes are safe, sanitary, and habitable. To avoid potential delays in the closing process, sellers should confirm their homes meet MPRs – before listing their property. That way, they can accept an offer from a VA home loan buyer with confidence.

Confirm VA Loan Eligibility via Pre-Approval

As discussed, being a veteran doesn’t necessarily mean a buyer qualifies for a VA home loan. Unfortunately, some buyers make this mistake, as well. And, no seller wants to waste months under contract if a buyer won’t ultimately qualify for financing.

Loan pre-approval doesn’t guarantee that a buyer will successfully close on a loan – obstacles can always arise at the last minute. But, requiring a pre-approval letter before accepting an offer from a VA home loan buyer accomplishes two items:

  • It confirms that the lender has verified the veteran’s VA loan eligibility status.
  • It increases the likelihood that the lender will ultimately approve the loan, as pre-approval entails lender-verified financial information.

NOTE: Having VA home loan eligibility does not guarantee that a veteran will be approved for a loan. Veterans still need to meet the lender-specific borrowing requirements (e.g. income, credit score, debt-to-income ratio, etc.).

Complete the VA Appraisal

Any home transaction involving a mortgage will require an appraisal. This is how lenders verify a home’s value, as they will not provide loans for more than a home is worth. All VA home loan buyers will need to complete a VA appraisal prior to closing. The primary purpose of this is to confirm value.

But, VA appraisals also serve as a way to verify the VA’s MPRs. While appraisers don’t complete full home inspections, they will highlight major MPR violations in their reports. And, when the VA reviewers see these items, they’ll put the loan approval on hold. These issues will either need to be resolved, or the loan won’t receive approval. As discussed above, sellers can avoid this situation by reviewing a property for MPR compliance before listing it for sale.

If concerned about MPR issues, sellers should hire an appraiser with VA experience. These professionals will be able to inspect your home and let you know what property issues to fix. That way, you’ll significantly minimize the likelihood of an MPR surprise during the VA appraisal required by any buyer using the home loan program.

Final Thoughts

In general, selling to a VA home loan buyer is no different than selling to any buyer. These VA buyers are actually more reliable than most other buyers. However, some differences do exist. And, by understanding how to prepare to sell to a VA home loan buyer, sellers put themselves in the best situation to close a home sale.


About The AuthorMaurice “Chipp” Naylon spent nine years as an infantry officer in the Marine Corps. He is currently a licensed CPA specializing in real estate development and accounting.


Related Articles
Minimum Property Requirements for a VA Loan Tips To Pass A VA Appraisal
VA Home Loans for First Time Buyers How Long Does a VA Loan Take to Close?
VA Home Loan Eligibility What Is A VA Loan?
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