First Time Home Buying for Veterans
Buying your first home can include a mixture of both excitement and nervousness. You’re excited to have your place finally but nervous about all the steps and red tape that can come with the process. But, it doesn’t have to be that nerve-wracking, especially if you are a Veteran!
The VA has laid the process out in straightforward, easy-to-follow steps.
Step 1: Get a VA-backed Purchase Loan
You’ll have to go through a government-approved lender, like a bank or mortgage company, to get this loan. The VA will guarantee part of the loan against loss, which allows your lender to give you better loan terms, like the option to pay no down payment or better interest rates.
You can use your VA-backed Purchase Loan to:
- Buy a single-family home, or multi-family up to 4 units
- Buy a condo in a VA-approved project
- Buy a home and make cosmetic improvements
- Buy a manufactured home
- Build a new home
- Refinance an existing home
Step 2: Find an agent and start shopping
Once you have a lender, it’s time to find a real estate agent and start shopping for your dream home. You’ll want to meet with a few different agents and find the right one for you. You can also ask your family and friends for recommendations so you know you and your agent are a good fit.
Once you’ve found an agent, it’s time to start shopping! You should know what your price range is and share that information with your agent so you can ensure the homes they are showing you aren’t out of your budget. You’ll also want to share the most important factors, like school zones, commute, features, etc.
Step 3: Making an offer
When you find the home you want to buy, you’ll start working with your real estate agent to put together a purchase agreement. Be sure the sales contract includes a “VA escape clause” or “VA option clause,” which gives you an option to void the contract if the property doesn’t appraise for the contract price.
Depending on the type of market, a “VA escape clause” may hurt your offer compared to the competition. If you are in a hot seller’s market, you may want to consider adding an appraisal clause with your offer. If the property doesn’t appraise, you agree to offer a specific amount above appraised value towards the purchase price.
Step 4: Get an inspection and appraisal
You should get an inspection to ensure that the home doesn’t have any significant damage or defects. Once your property passes inspection, your VA-approved lender will order the home’s appraisal to ensure it meets basic property condition requirements. They will also provide an opinion of value on the house, which the bank will use to determine how much they will fund your purchase.
So what do you do if the property doesn’t appraise at a value that’s high enough to get the loan? You can:
- Request a Reconsideration of Value (ROV). To do this, you will ask your real estate agent to provide the lender with valid sales data showing the property is worth more than its appraised price. The lender will ask the appraiser to reconsider based on this information.
- Renegotiate the sales price. Ask the seller to lower the cost to match the appraised value or somewhere in between.
- Pay the difference between the appraised price and the sales price. To do this, you’ll need to pay this cost at closing.
Step 5: Close on your home and move in!
Assuming everything goes as planned and your offer is accepted, then it’s time to close on your first home! Your lender and your real estate agent will walk you through the closing process, but go into it prepared to sign many documents.
Once you’ve finished signing off on everything, the home is yours, and it’s time to start moving in!
The process of becoming a first-time home buyer can seem a little daunting at first, but if you follow these steps then you’re well on your way to owning your first home. The VA also has tons of resources to help you through the process.
Have a question about your Veteran benefits? You can email us today! If you are within one-year pre to post-military separation, you can enroll in our FREE program by setting up a call with one of our transition coaches.