For veterans or service members looking to buy a home with a Veterans Affairs loan, there are some extra steps to take and home condition requirements that aren’t needed with other types of loans.
The home must be safe, clean, in good condition and move-in ready, partly because the U.S. Department of Veterans Affairs doesn’t want to back a loan where the military member’s finances are at risk because they have to make unexpected home repairs.
The extra work can be worthwhile. VA loans are 0.25 to 0.50 percent lower than conventional loans, don’t require a down payment or mortgage insurance, and have more flexible and forgiving requirements. Closing costs are limited and lenders fees are limited to 1 percent of the loan amount.
The government guarantees at least a quarter of the loan amount on a VA mortgage, which is why a down payment and mortgage insurance aren’t needed.
For buyers who qualify, here are some things to be aware of when buying a home with a VA loan:
Look for a move-in ready home. Homes that are structurally sound, safe and sanitary are more likely to pass the VA appraisal. The property must have adequate heating, roofing and safety features, and major issues must be repaired before the loan can close. If the VA expert has to return to reinspect something that needs to be fixed, the borrower will have to pay more inspection fees.
Be ready for an inspection. A home inspection is a normal part of buying a house, but a VA inspector will make sure the property is in good, working order. But a lot of the things they’ll be looking at are cosmetic, which a regular lender wouldn’t be concerned with. Though a VA inspection can sound like a professional home inspection, it isn’t and buyers can hire their own inspectors after the VA one if they’d like.
And more inspections. The VA also requires some inspections that other lenders don’t. A VA loan will require a pest inspection, along with a look at the septic tank, if there is one, and the water well if the property isn’t on a city water line.
Quicker timeline. VA loans have tighter timelines than other types of loans, which is why hiring a real estate agent and loan officer who have experience with VA loans can make the process smoother. Active-duty service members can have short buying windows if they’re ordered to move to another base.