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Your best bet for getting a mortgage as a veteran comes in the form of VA Home Loans, which are insured by the Department of Veterans Affairs and allow qualified borrowers to buy homes with no down payment. However, getting a good mortgage as a veteran also involves finding the right mortgage lender. And in some cases, you may find that you qualify for a mortgage-free home provided by a nonprofit group.
Mortgage Programs For Veterans
The first step towards obtaining a home loan is to identify your choices. Conventional mortgages are just one option for home financing, and if you're a veteran they're far from your best option. Several government-sponsored options exist to help current and former servicemembers get a mortgage.
Eligibility Requirements on Government-Backed Mortgages
|Program||Min. Down Pmt.||Typical Credit||Other Requirements|
|VA Home Loan||0%||620||Debt ratio and loan limits, Certificate of eligibility (COE)|
|FHA Loan||3.5%||580||Debt ratio and loan amount limits|
|USDA Loan||0%||640||Location and income limits|
VA Loans. While there are multiple mortgage programs designed to make homebuying easier for people, the VA Home Loan Program is easily the strongest mortgage option if you're a veteran. Even if you haven't saved a substantial amount, a VA loan lets you buy a home worth up to $424,100 with no down payment. Even compared to FHA loans or conventional mortgages, the VA loan's zero down requirement delivers an unmatched advantage. Borrowers undertaking new construction may even be able to convert their interim financing into a VA construction loan.
FHA Loans. Although qualifying for VA loans is relatively simple, there are other cost-effective programs that veterans can apply for. FHA loans are insured by the government to create opportunities for mortgage borrowers with bad credit or low savings. If you find that your credit score is getting in the way of a VA loan approval, FHA loans may be a more accessible option. However, they come with a minimum down payment of 3.5% or 10%, depending on your FICO score.
USDA Loans. If you're thinking about buying a home in a suburban or rural area, you may qualify for a zero-down mortgage backed by the USDA. USDA home loans are meant to encourage homeownership in non-urban areas of the US, and allow borrowers to enter mortgages with no money down as long as the property is located within a qualified area. Household income must also fall under a limit that is different for each area. You can find out whether you live in a qualifying area here.
Military-Friendly Mortgage Lenders
While multiple government agencies participate in guaranteeing mortgages for veterans, they still rely on private mortgage lenders to originate and service these loans. Many private lenders like banks and credit unions advertise VA loans at competing rates, but a few military-friendly institutions specialize in delivering service that's tailored to the needs of both veterans and active-duty servicemembers.
USAA. Consistently rated among the most consumer-friendly American companies, USAA provides financial services that range from deposit accounts and investments to loans and insurance. The company caters specifically to veterans and servicemembers, making it a good place for veterans to consider starting a VA loan application. In addition to providing excellent support for its customers, USAA offers competitive rates on both VA loans and conventional mortgages.
Navy Federal Credit Union. Navy Federal is a credit union where membership is limited to members of the armed forces and their families. While the concept of a credit union may be unfamiliar to most people, the benefits are straightforward: credit unions like Navy Federal are technically owned by their members, which means that they tend to offer more favorable fees and interest rates on their products. For mortgages, Navy Federal offers extremely low rates on VA loans, beating conventional rates at major banks by nearly a full percentage point.
Pentagon Federal Credit Union. PenFed is another credit union that's exclusive to servicemembers and employees of the Department of Defense. Alongside checking accounts and investment accounts, PenFed's VA loans offer zero-down mortgages for qualified members at an institution where each financial product is designed for veterans. As with any credit union, PenFed's policies and fees are likely to put customer convenience ahead of profit. This helps ensure that unlike a for-profit bank or mortgage lender, the credit union will seek to work on your behalf when you run into problems with your mortgage.
Mortgage-Free Homes For Veterans
Several nonprofit organizations in the US work to provide mortgage-free houses to veterans who were wounded in action as well as to Gold Star families. If you belong to either group, you may be able to receive a newly-built home with no need for a mortgage at all.
|Military Warriors Support Foundation|
|Building Homes For Heroes|
|Operation FINALLY HOME|
While these programs aim to provide mortgage-free homes for injured veterans and spouses of fallen soldiers, they usually expect the future homeowner to meet other financial obligations such as property tax and homeowners insurance. Since each nonprofit sets its own priorities and eligibility guidelines, you'll need to examine which groups are available to you and operate in your area. In addition to the nonprofit's own application, you'll probably need to provide general documents like proof of income, VA paperwork and your CAC or other ID.