VA Home Loan Benefits for Veterans and Wounded Warriors

American flag hanging in front of covered porch

In the last 72 years, government-backed mortgages have helped more than 22 million active, reserve, and retired service members buy a home.

Yet remarkably, there’s still room to grow.

Over 1 million wounded warriors aren't taking full advantage of their VA loan options, research shows.

See related study: "Wounded Warriors Left Behind? Majority of Post-9/11 Vets Leave Millions of Dollars In Benefits Unclaimed".

If you're on active duty or a veteran, now's the time to take another look at this incredible benefit!

Here are five home loan benefits available exclusively to veterans:

1. No down payment or mortgage insurance required

Most loans require a down payment of 3.5-20% of the purchase price. If you utilize a non-VA loan and put down less than 20%, you’ll be subject to mortgage insurance. That could increase your payment by hundreds monthly.

Think of it this way, if you purchase a home that's $350,000 using a 30-year fixed rate loan at a 4.125% interest rate (note: these are hypothetical numbers and do not reflect current market rates), you'll need to come up with $70,000 to cover a 20% down payment or $12,250 to come up with a 3.5% down payment (which is subject to mortgage insurance). It's easy to see, a VA loan offers incredible home loan benefits, and it's an easy way to keep more dollars in your pocket.

2. VA loans are government-guaranteed

VA-guaranteed loans are made by private lenders such as banks, savings and loan associations, or mortgage companies. To get a loan, you apply to the lender. If the loan is approved, VA guarantees the loan when it is closed. The guaranty means the lender is protected against loss if you or a later owner fail to repay the loan. Learn more about how VA loans can work for you!

Similarly, the VA proactively monitors each active loan to make sure payments are on track. The VA has foreclosure specialists who can help borrowers 60 or more days behind on their mortgage create a more affordable repayment plan.

3. Fast access, even if you’re on active duty

Service members become eligible for VA loans after having served 181 days during peacetime or 90 consecutive days during wartime — unless discharged or separated from a previous qualifying period of active duty service. You may also be eligible if you have more than six years of service in the National Guard or Reserves.

4. Buy or refinance repeatedly

You can work with the VA to use the benefit as many times as you’d like. There is a VA funding fee of 2.15% for first time VA loan use. That fee becomes 3.3% for each subsequent use of a VA loan. However, that rate is just 0.5% if you currently have a VA loan and only want to reduce your rate or possibly your term (additional restrictions apply) without taking cash out. This option is called a VA IRRRL (Interest Rate Reduction Refinance Loan).

An IRRRL is only a refinance option if you've already used your VA loan eligibility. It must be a VA to VA refinance, and it will reuse the original entitlement. No appraisal may be required when applying for a VA IRRRL loan, though terms may vary by lender. Be sure to ask your lender about VA IRRL home loan benefits for veterans and wounded warriors.

5. Refinance up to 100% of home’s value

Lower monthly payments, consolidate debt, and access cash. You can even draw up to 100% of your home’s value. VA streamline and cash out refinance loans are far more attractive options than refinancing with a non-VA loan. That's because many non-VA loans require some equity in the house. In fact, the cash out refinance option allows you to take an existing conventional loan and refinance it to a VA loan. It doesn’t have to be a VA loan refinanced to a VA loan.

Let's not forget, VA rules limit the amount you can be charged for closing costs (and closing costs are often a pain to deal with when it comes to refinancing).

There are three added home loan benefits available to wounded warriors, including:

1. Exemption from the funding fee

Veterans rated at least 10% disabled (because of a service-connected disability) may be exempt from the VA funding fee. Costs add up quickly. Remember, the fee is generally 2.15% of the amount borrowed for first-time use. That fee goes up to 3.3% for every subsequent loan. A disabled vet borrowing $200,000 would save $4,250 on their first home purchase or $6,600 if they’ve used their benefit previously. Non-disabled vets can reduce the funding fee by making a larger down payment.

2. Often no minimum service requirement

Disabled vets usually qualify to receive VA loan benefits immediately, without having to wait the minimum required service days. However, even wounded warriors are required to meet certain credit and income minimums to receive a VA loan.

3. Grants for special accessibility modifications

For those who’ve suffered particularly debilitating injuries, the VA offers Specially Adapted Housing (SAH) grants. These grants pay for mobility modifications and help make homes more accessible.

Serving our country is commendable. Individuals who do so deserve certain privileges. The VA mortgage program is an excellent opportunity to save veterans thousands of dollars. Call today and let American Financing’s mortgage specialists help you take advantage of home loan benefits for veterans and wounded warriors.* We're proud to have many veterans as part of our staff, and they're ready to walk you through every step of the way!

*VA loan requirements are subject to change. As a result of COVID-19, mortgage investors are unable to support as many loans, meaning underwriting guidelines for government loans are becoming more strict.