Are you a veteran thinking of taking advantage of the VA loan program to buy a home? Well, congratulations! You do need to be aware, though, that the process of buying a home can be a little bit different for veterans, particularly if you plan to get a VA loan.
But many things remain the same, such as the necessity of having an amazing agent in your corner who understands the nuances of VA loans. So if you’re a veteran, check out this veteran’s guide to buying a home in Boston.
Overview of VA Loans
First, veterans buying a home in Boston need to understand a little about VA loans.
A VA loan is a different form a standard mortgage loan and can be more than a little confusing.
Most veterans are eligible for a VA loan, which is provided by private lenders but backed by the U.S. Department of Veterans Affairs. Like any homebuyer, veterans eligible for the VA home loan program should shop around to different lenders to find the best mortgage for their needs.
The benefits of VA loans include:
- Zero down payment
- Looser credit requirements
- No private mortgage insurance required
- No cap after January 1, 2020
VA loans do, however, require that you pay VA funding fees and loan closing costs, which are not typically included in other mortgages.
VA Home Loan Types
When working with the U.S. Department of Veterans Affairs, there are multiple options for loans that will help you buy, build, or improve a home, or refinance your current home loan
VA DIRECT HOME LOANS
With a VA direct home loan, the U.S. Department of Veterans Affairs serves as your mortgage lender, which means that you will work directly with them to apply for and manage your loan.
VA-BACKED HOME LOANS
With a VA-backed home loan, the U.S. Department of Veterans Affairs guarantees a portion of the loan that you will receive from a private lender. If your VA-backed home loan goes into foreclosure, the guaranty allows the lender to recover a percentage of, or all of their losses.
Since there’s less risk for the lender, they’re more likely to give you the loan under better terms. In fact, nearly
Lenders follow the VA standards when making VA-backed home loans, and may also require additional qualifications before approving the loan. These standards may include credit score qualifications and getting an updated home appraisal.
90% of all VA-backed home loans are made without a down payment.
Other Lending Options
A VA loan should probably be the first option for veterans buying a home in Boston to consider, given the unique service qualifications for the program. But, you still should explore all the lending options to find the best fit for you and your particular circumstances.
Some viable mortgage loan options are:
- USDA loans – If you’re looking to buy a home in a non-urban area of the US, you may qualify for a zero-down loan backed by the U.S. Department of Agriculture. USDA loans allow buyers to secure these mortgages as long as the property is within a qualified area. If you can’t qualify for a VA loan income-wise, then a USDA loan may be a viable option.
- FHA loans – FHA loans are similar to VA loans in that they don’t require great credit or a large down payment (although the cost savings of FHA loans can’t beat those of VA loans). But if your credit score is too low (say, in the 500s) to qualify for a VA loan, you still may qualify for an FHA loan.
- Conventional Loans – Don’t forget to take a look at conventional mortgage loans. Yes, they have more rigorous credit and financial requirements, as well as higher down payments, but these can ultimately work to your benefit. Stricter requirements often mean better rates, and that, combined with a higher down payment, can mean paying off your home sooner and at less cost over the long haul. Be sure that you get pre-approved for any conventional loans before actively pursuing any specific properties.
Importance of Credit
It is true that VA loans have more lenient credit requirements than traditional mortgages. But that doesn’t mean you can’t pay any attention at all to your credit score and credit history – because it still matters.
Veterans who are thinking about buying a home in Boston do need a credit history of some sort with more positive than negative indicators. Check your score regularly to ensure your current actions are building, and not hurting, your credit.
Read about some additional ways that you can improve your credit in one of our previous blog posts.
Qualifying for a VA loan (or any other mortgage loan) will require current employment, job stability, sufficient income, and a decent employment history.
This means that you need to keep your employment stable and consistent both prior to and during the home buying process. If at all possible – do not switch jobs during a home search or when you have an active mortgage application. We see this happen regularly. It’s one thing if you are moving to a new market for a new job and buying a house there. It’s another if you’re switching jobs without much explanation (or, even worse, industries – remember, banks love stability and predictability).
Lots of jobs or gaps in your employment history are red flags for lenders. Remember: even a VA loan isn’t guaranteed until the transaction is finalized at closing.
Don’t forget to factor in closing costs – which veterans buying a Boston home (unfortunately) often do. Although VA loans typically involve limited closing costs, there still exist, and they can add up.
Veterans still have have to pay for a credit report, appraisal, title insurance, recording fees, and a survey. Over the life of the loan, there may be other recurring charges that the veteran will be responsible for, such as hazard insurance. The types of fees and their amounts vary greatly by state. Your lender should provide you with a loan estimate, which outlines the exact fees you’ll need to pay at closing. You can also negotiate these costs, and the seller may pay for some of them.
Benefits of Having a Good Agent
No veteran’s guide to buying a home in Boston would be complete without a mention of the benefits of having a good local real estate agent in your corner. At NextHome Titletown Real Estate, we support veterans and have worked with a number of veterans who have used VA loan programs to secure the homes of their dreams!
We understand the buying process for veterans, and can help you navigate all the intricacies and complexities and ultimately help you get a better deal. Find out today how our experienced agents can help you, as a veteran, purchase your home.
Reach out to us today to learn more about buying a home in Boston! (617) 657-9811
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