It’s that time of year when Military members and their families get their permanent change of station (PCS) orders. PCS season can be hectic, as there are many logistics to consider when relocating. If you’re considering buying a home at your new station rather than renting, you may want to take advantage of your Veterans Affairs (VA) home loan benefits. Below are a few factors you should consider before you make your move.
Understanding the Role of VA Loans in Military Moves
When PCS orders come through, sorting out housing is often at the top of our relocation to-do list. VA loans are a huge benefit to Military members looking for a mortgage, as they provide some key benefits as compared with conventional loans. Here’s a quick summary:
Advantages of VA Loans Over Other Mortgage Options:
- Low to No Down Payment
VA loans often don’t require qualified borrowers to make a down payment at all when securing a home. - Competitive Interest Rates
VA loan interest rates are typically lower than those of conventional loans, making them more affordable over the long term. - Flexible Qualification Standards
Because these loans are guaranteed by the government, lenders may be able to accept lower credit scores than they’d allow for other loan types. This is especially important during PCS season, when time constraints and logistical hurdles are a factor. - No Private Mortgage Insurance
Conventional loans typically require private mortgage insurance if the buyer puts less than 20% down, but VA loans do not, potentially giving borrowers major cost savings.
Preparing Financially for PCS Season
PCS orders come with plenty of out-of-pocket moving costs, and it can help to save up well in advance of receiving your orders. Here are a few financial items to review:
- Credit Report
Make sure there are no errors in your credit report, and get a clear understanding of your outstanding debts. Order your free credit report from each of the major bureaus here. - Moving Budget
Sit down and tally up all of your moving costs such as packing supplies, gas, movers, temporary lodging and whatever else you might need. Here’s a useful PCS checklist tool. - Closing Costs
VA loans sometimes come with a funding fee which can range from 0% to 3.3% of the home’s value. Make sure you’re budgeting for this possibility, as well as typical closing costs like title insurance, appraisal fees, discount points and other costs. You may be able to negotiate with a seller to cover some of these costs. - Basic Allowance for Housing
Take advantage of this service member benefit if it’s available to you. You can use your BAH to cover part of your mortgage payment, which could save you thousands. Your BAH will vary depending on the Command you are reporting to and your rank. Learn more.
Readying for a VA Loan
PCS season might be overwhelming, but remember that there are VA loan experts who can help you navigate the process of getting a mortgage. At Newrez, we’re well-versed in the ins and outs of VA loans, and we’re deeply committed to helping our Military and Veteran borrowers achieve their homeownership goals. Learn more.
Here are the steps you should take when securing your VA loan:
1. Check Your Eligibility
Veterans, active-duty Military and some surviving spouses are eligible for VA loans. For active-duty Military, eligibility will depend on how many consecutive days you have served. For Veterans, your required number of days will depend on the time period in which you served and the circumstances of your discharge. You can look up specific service requirements and request a Certificate of Eligibility on the VA’s website.
2. Verify Your Entitlement
If you haven’t yet used your VA home loan benefit, you may have full entitlement. This means that as long as your loan is $144,000 or higher, the VA guarantees to your lender that the VA will pay back up to 25% of your loan if you default, lowering lender risk. Full entitlement also grants the borrower the ability to put zero money down.
If you’ve already received a VA loan, either for your current home or in the past, check to see if you have any entitlement remaining. If you’ve paid off your previous loan in full and sold the home (or you plan to sell it when you move), your entitlement will likely be restored in full.
You may have remaining entitlement if you are still paying back a VA loan. If you have remaining entitlement, your VA home loan limit is based on the loan limit in the county where the property is located. This means that if you default, the VA guarantees to pay your lender up to 25% of the county loan limit, minus the amount you’ve previously used. Look up county loan limits here.
Here’s more information about VA loan entitlement.
3. Secure Pre-Approval**
Once you’ve verified your eligibility, getting pre-approved will let you know how much you can afford. Gather up all of the necessary financial documents that prove your income and assets, and prepare for your lender to run a full credit check.
Be sure not to skip this step, as pre-approval helps streamline the mortgage approval process when you’re ready to close on a home. Best of all, pre-approval with Newrez is quick and easy – you’ll typically get your pre-approval letter within minutes.
The VA Loan Process
Here’s a visual breakdown of the VA loan process from start to finish:
Click image to enlarge in new tab.
Work with an Experienced VA Lender
At Newrez, serving our Veterans and active-duty Military is at the core of who we are as a company. From our community outreach to our Military Family Advisory Council, Newrez is honored to support those who have served.
Our mortgage experts are happy to help Veterans and Military members get a great loan and have all of their questions answered. Reach out to us today.