With all of the benefits VA home loans offer, they aren’t always easy for veterans and service members to get into.
Real estate professionals who know how to maneuver the government-backed program can be difficult to find. And coming up with the money for closing costs and other expenses of buying a home can leave some military members on the brink financially.
With up to 100 percent financing, low interest rates and closing costs, and no need for private mortgage insurance, home loans insured by the Department of Veterans Affairs can often be the best option for veterans and troops who want to buy a house.
But beyond knowing the program’s rules — which lenders should be able to help buyers navigate — some vets may need more help. Extra assistance can come in the form of different home loans or other programs to replace or supplement VA home loans – ones that can have lower interest rates, zero-interest loans for down payments, and other benefits.
These alternative programs can have restrictions and eligibility requirements that exclude some veterans or properties, or require homes be in certain neighborhoods. Programs vary by state, and a real estate agent or mortgage broker should be able to help vets find assistance programs in their state that apply to their situation.
‘Some agents don’t want to be bothered’
Laura Delprete, a veteran’s wife who with her husband bought a home with a VA loan in Monmouth County, N.J. five years ago, said she searched “high and low” for additional funding but couldn’t find it.
“It was extremely difficult as often times real estate agencies will tell you they have an ‘expert’ in VA loans, but not really,” Delprete says. “Some agents don’t want to be bothered with a VA loan, to the point where I had one roll their eyes and make a noise of aggravation.”
“It was such a ridiculous ordeal that I was ready to walk away a number of times,” she says, adding that they had seven closing dates over four months before buying their home.
A VA loan can require some extra expertise from real estate professionals, but it shouldn’t be that much harder than any other loan, says Ken Bates, branch manager at Military Home Loans in San Diego.
“It’s not really harder to do but there are some extra requirements that make it a little more work for real estate agents,” Bates says
Agents are more likely to be familiar with VA loans in areas where military bases are present, leading to more VA home loans around bases, he says. In San Diego County, which is home to Marine and Naval bases and has 227,000 VA loan-eligible vets living in the area, 16 percent of home buyers have VA loans, Bates says. In nearby Los Angeles County, which doesn’t have military bases but has 300,000 vets eligible for VA loans, only 5 percent of them have VA loans.
Help for first-time buyers, repairs, down payments
One add-on to a VA loan that is often overlooked is increasing the loan to add energy efficiency improvements. Just adding a better heater, for example, that adds up to $3,000 to a home’s value can be put on a VA home loan, Bates says. Supplemental loans through the VA are also available for other property improvements.
Like any other home buyers, veterans can also qualify for first-time homebuyer loans such as FHA home loans that don’t require high credit scores or down payments, and USDA loans for living in rural areas.
“There’s a whole world of down payment assistance programs,” Bates says. A good place to start is by looking for a home in an area that state and local officials want to improve with more home ownership, which is where assistance programs aimed at vets can be plentiful.
In the state of Georgia, the Georgia Dream programs helps first-time buyers and people who haven’t owned a home in three years with up to $5,000 in down-payment assistance through a zero-interest loan if they buy in certain areas of the state. Active-duty service members, first responders and some other groups can get up to $7,500.
The Keystone Home Loan Program in Pennsylvania offers low interest rates and fees to first-time buyers. Discharged veterans can qualify regardless of when they’ve bought a home.
While VA loans don’t require a down payment, some borrowers may want to make a down payment anyway to make their monthly mortgage bill lower. Some state programs help veterans with down payment assistance, such as the Florida Military Heroes loans for veterans and service members.
Indiana’s Honor Our Vets program provides up to $5,000 to help vets who qualify for a VA-backed loan with a down payment, closing costs or relocation expenses.
The Maryland Homefront program also offers $5,000 in down payment and closing assistance — through a zero-interest deferred loan — to active troops and veterans.
In New York, the Homes for Veterans Program offers up to $15,000 in down payment assistance to eligible veterans.
The Homes for Texas Heroes program has special rates and benefits for veterans, including down payment assistance who are below certain income thresholds. The down payment assistance is 3 to 5 percent of the loan amount and is a gift that never needs to be repaid, according to the Texas State Affordable Housing Corp., which runs the program.
In Washington state, the House Key Veterans program provides loans of up to $10,000 for down payments.
The Alaska Housing Finance Corp. gives some veterans — but not active-duty troops — a 1 percent discount on the first $50,000 of their mortgage.
Some state programs offer better loan rates than VA home loans. In Mississippi, the Veterans’ Home Purchase Board offers vets loans at interest rates that are typically 1 to 2 percent below market rates.
CalVet Home Loans in California also has below-market rates for some veterans, with low or no down payment requirements.
Massachusetts has the Home for the Brave Home Loan Program that offers low rates. Like many programs for military members or their spouses, income limits and other restrictions apply.
In Nevada, the Home is Possible for Heroes programs offers below-market interest rates for 30-year fixed mortgages. Restrictions include a credit score of at least 640 for government-issued loans, qualifying income below $98,500 a year, and a home price of less than $400,000.
Whatever extra financial help veterans, active-duty members and their spouses get, they should know that if they also have a VA loan, the additional program must meet VA requirements. That burden is on lenders, Bates says, with the VA guaranteeing the loan and sometimes auditing them for compliance.
“The VA has pushed all of the responsibility and authority down to the lenders,” he says.
While assistance with closing costs, down payments or other areas of a home loan can be a tremendous help to veterans, a big benefit is allowing a buyer to improve their offer in a tough real estate market. Making your offer on a home stand out by more easily qualifying for a loan and not having to push your budget too far can only help make a home purchase easier.