The questions you have as a first time VA home buyer may differ than if you were a first-time home buyer for another loan type. First time VA home buyers will probably have questions about the mortgage program and why so many veterans use it to buy a home. Here are a few frequently asked questions that a first-time military veteran may have.
Why should I use a VA loan?
If you meet the requirements to qualify for a VA home loan, it is a mortgage product you should strongly consider using. One of the biggest benefits is that VA loans come with the lowest mortgage rates of any mortgage type. You also won’t be required to make a down payment, and some closing costs and fees can be waived or exempted. Additionally, you’re able to use your VA loan again and again based on any remaining entitlement.
Why don’t I need to make a down payment?
Now you may be wondering why you don’t need to make a down payment. The VA home loan is backed by the VA which includes their guarantee, meaning they assume a lot of responsibility that would typically fall onto the home buyer. The purpose of a down payment or mortgage insurance on other loan types, is to protect the lender in case the home buyer defaults on their loan at any point down the road. With the VA home loan, the VA guarantees the loan just like mortgage insurance would, so you as the buyer don’t have that additional cost. It is important to note that even though a down payment is not necessary for the VA home loan, a lot of VA home buyers opt to put some amount of money down if they are able to lower the cost of their VA loan even more.
What about mortgage insurance?
With an FHA loan, if you opt to put the minimum 3.5% down, you are also signing up for mortgage insurance. So, it’s a common thought for first time VA home buyers that if a down payment isn’t required with a VA home loan, then mortgage insurance is. VA home buyers don’t have to worry about this. The VA’s guarantee extends to insurance as well, protecting the lender while making your home more affordable for you.
How long does the VA loan process take?
A common fear for first time VA home buyers is that VA home loans take a long time to close. Either with complications or issues with the appraisal. On average, VA home loans take an average of one to two days longer than other loans, which in the grand scheme of things isn’t that different. Closing time varies from buyer to buyer and lender to lender. I utilized my VA loan when I relocated a couple of years ago and I was able to get underwritten, approved, and ready to close in less than ten days! The best way to get an idea of how long the closing process will take is to talk to me as your lender and we can create a strategy to meet your goals.
Can I Get a VA Home Loan if I am Self-Employed?
Do you own a business and want to buy your own home with a VA home loan? Good news, it’s possible. Self-employment can pose challenges when purchasing a home with any loan type. Because the income of self-employed individuals can be variable it sometimes requires more documentation than those receiving fixed monthly salaries.
What’s considered self-employed?
First, let’s define the term “self-employed.” You are considered self-employed when you meet any of these four criteria: you are the sole owner of a business, you own at least 25% of a business, you work as a freelancer, or you are a contract worker. Every lender has different policies and guidelines of VA loans for self-employed veterans. As your lender, I’ll be there every step of the way with the exact guidelines to get us to the closing table.
What Documents are required for self-employed individuals to get a VA home loan?
The biggest challenge with most buyers is gathering all the documentation to show you are a strong borrower as a self-employed individual. Lenders need a healthy amount of information to decide to give you the loan in addition to usual requirement on the VA home loan application. These additional requirements include your current financial statement, two consecutive years of individual income tax returns, two consecutive years of business tax returns, and list of your partners/stockholders. Additionally, you may need letters of recommendation from your business partners stating that you will responsibly handle a home loan. Again, this can vary based on lender, so I will be there to guide you on what documents are needed based on your situation.
Can Freelance workers have a VA home loan?
Yes, it’s possible for freelance workers to obtain a VA home loan. Typically, individual tax returns and all applicable income documents for two years may need to be submitted. If you’re self-employed, stability is only considered if the business has been in operation for at least two years. In addition to the life of the business, a profit and loss statement for the current year is required if the taxes have not been filed. This allows the lender to determine if the business is heading in the right direction and whether the lender is confident that you will be a strong borrower. Again, I have many different lending partners with many different guidelines, so reach out to discuss your individual situation.
So, yes, it’s possible to obtain a VA home loan if you are self-employed, it just requires a bit more documentation. This may sound a little daunting, but it is reasonable that lenders need to see that your business is reliable and sustainable.