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Homebuying & Selling
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3 min read
Homebuying is one of the most daunting processes someone can go through—spending hours driving around, attending open houses, swiping on real estate marketplaces—and that’s before entering the negotiation and closing processes.
Now, add the stressor of being deployed almost 8,000 miles away from your spouse who is working a full-time job and navigating the process through an eight-hour time difference.
This was my first homebuying experience, and we would not have made it through it without the ease that comes along with a Veterans Affairs Home Loan, or VA loan.
Four years later, in 2021, navigating the process of buying another home using a traditional loan showed not only the financial savings associated with using a VA loan but how easy it is to use.
In this blog post, I’d like to share my experience to help other veterans take advantage of their VA loans and navigate their homebuying journey.
Key Highlights of My Experience Using a VA Loan vs. Traditional Loan
For me and my family, buying a home with a VA loan was an overall easier and more cost-effective option than using a traditional loan. Here are the main differences I experienced:
VA Loan
- Easy to use: Prequalifying through a VA lender was an easy process. They obtained my Certificate of Eligibility (COE) for me from the Department of Veteran Affairs.
- Secure: There are strict VA loan rules and regulations in place to protect the homebuyer.
- Easy to shop around: Most loan companies are happy to accept VA loans.
- Insurance savings: Monthly mortgage insurance is not required with a VA loan, although a funding fee is typically required for first-time use and can be financed. Every dollar counts and this gave us more money in our pocket for unplanned expenses associated with homeownership.
- More relaxed credit standards: Although no minimum credit score is required by the VA, most lenders set their own.
- No down payment is required as long as the property appraises for the sales price.
Traditional Loan
- More complicated: We had to navigate through different types of loan options, including FHA, Conventional, USDA, and more. In addition to different options for different loans, different companies service each loan type.
- More worry: With the traditional loan, there was more to worry about. We had to ask ourselves more questions like, “Is this a good deal? Are we forgetting anything? Is there something hidden in the paperwork?”
- Down payment required: Except for USDA loans which also allow for no down payment in eligible areas, most other loan programs require some down payment.
Related Reading: Comparing Traditional Mortgages and VA Loans for Veterans
Comparing How Easy the Loan Types Are to Use
Entering my first homebuying experience, I was terrified about what the process would entail. Would it be an HGTV, picture-perfect experience, or would it be a nightmare-fueling scenario?
My real estate agent recommended I use my VA loan benefits. My VA lender obtained my Certificate of Eligibility and a few days later, we picked our lender prequalified loan and moved forward with the process.
For my second home, we worked with a mortgage broker to help us navigate the process. This included different types of loans including, conventional, FHA, USDA, and others each with their own requirements, processes, and companies that service them.
Comparing Peace of Mind
The protections afforded by the VA loan eased my mind regarding spending hundreds of thousands of dollars. I knew I was getting the best possible deal designed to protect me and my investment in the long- and short-term.
- With the VA loan, there were far fewer barriers to entry for a first-time homeowner. The fact that there’s no down payment helped ease my mind about making such an important purpose.
- VA appraisal meant my home would have to meet stricter guidelines than a conventional appraisal.
Costs Associated with VA Loans vs. Traditional Loans
With the VA loan, I had fewer out-of-pocket expenses. The seller is allowed to pay closing costs and not having to pay a down payment on my first home created options for me I did not have with my second home—I was able to use the money I saved to purchase new appliances, furniture, and other first-time homeowner expenses. I also had the option of using the saved money to buy down the rate and save more money in the long run.
Depending on the type of loan used, down payments can range on traditional loans. With my traditional home loan for my second home, a down payment was required. This meant I needed to have additional money saved for appliances, furniture, and unexpected expenses.
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