A Beginner's Guide to VA Loans: First-Time Homebuyer Edition

It's Jimmy V here, mortgage originator specializing in VA loans, and today I'm going to share everything that I know for my first time homebuyers that are wanting to use their VA home loan benefit, what you need to know, how it works, so that way you can be AJ squared away with the information that you're going to receive from this video and go out there with confidence and utilize, in my opinion, what is the very best mortgage loan product today that's available for you and I as veterans or active duty service members to purchase a home and build and create wealth. Good to go. So if you have questions on this video, make sure to drop a comment down below. Also, if you feel like I've earned it, all right, consider showing your love by clicking like on this video. And lastly, if you want to learn more about VA home loans, consider subscribing to the channel, so that way we can educate more veterans and active duty service members, right? So this is just kind of a one-on-one, you and I hanging out together, talking about VA loans as first time homebuyers. So really the first thing that I want you to know about your VA home loan benefit is that it does not require a down payment. It's free real estate. It does not require a down payment. Now, why is this important? A lot of times veterans view home ownership or a barrier to home ownership is the money that you need to do so. That's what's neat about the VA. The VA will allow us to purchase a home up to any purchase price we would like with no money down. Yes, in addition to that, you also have to keep in mind that in order to utilize this product, there's a couple of forms that you're going to need to have. One in particular is your DD214, box 24. We're going to check to see that you've been honorably discharged from the military in order to utilize your VA home loan benefit. If you're an active duty service member, wanting to purchase a home, obviously you're not going to have a copy of your DD214. Now, there's some exceptions to this rule. If you were medically discharged, you would be entitled to VA home loan benefits if you receive service-connected disability. Good to go. And in addition to that, if you're a reservist, a reservist typically had to have served six years in order to get a VA home loan. However, if you've done 90 days of active duty military, okay, not including bootcamp, you too would be eligible for your VA home loan benefit. Now, there's some other things that you need to know about the VA home loan and what makes it so competitive for you as the veteran to use. Number one, no private mortgage insurance. If you compare VA loans to conventional or FHA, VA loans will usually win because there's no PMI. PMI is private mortgage insurance. It's basically paying insurance on yourself every month to the lender in the event that you were to foreclose. Listen, it's a waste of money. You don't want to have to pay it. And that's what makes the VA loan so competitive. On any loan amount greater than 80 LTV, loan to value, on a conventional, you're going to pay PMI. In addition to that, on FHA, you're always going to pay PMI. VA loans don't have this, which is why it's such a competitive loan. No money down, no private mortgage insurance required. Let's talk a little bit about the money that you as the veteran need to have in the bank in order to get a VA loan. Guess what? VA doesn't have any set forth or minimum requirements as far as reserves are concerned that you need to carry in the bank to get approved for the VA loan. Now, it's important. Obviously, the more money that you have in the bank, the stronger your file looks to the lender and increases the overall likelihood that you are approved for that loan. And it's always a good idea to have money in your bank account, right? Because in the event that something were to break in your home, you're just going to be in a position to cover that. So while I'm not advocating to buy a house with no money down, I'm saying that it's a good idea. And most importantly, you need to understand VA guidelines. There's no minimum amount of money that you need to carry in the bank when purchasing a single family primary residence. Good to go? So in order to get a VA loan, there's a couple of things that you need to know. Number one, let's talk about credit scores, right? So interestingly enough, VA does not have a minimum credit score requirement. Now, that doesn't mean that you as a veteran, if you have a sub 600 credit score, are just going to be approved for a VA loan with less than perfect credit. There are lenders that require specific or minimum credit scores. Now, I'm going to give you my general rule of thumb for the credit score required, needed for a VA loan, and that is this, 620, all right? Now, there might be some lenders across the nation that are willing to go lower. I typically tell my clients minimum 620 because number one, it increases the likelihood that you'll be approved for the loan when we, as the mortgage loan originator, run your loan through something called automated underwriting. And number two, it helps you to save money. So you're going to get more competitive financing terms, both in the form of interest rate and the cost associated with getting that loan. So that is the minimum, in my opinion, credit score requirements. This may vary from lender to lender. I want you as the veteran or active duty service member who's a first-time buyer and wanting to utilize your VA home loan benefit to understand a list of documentation that you're going to need to provide the mortgage lender in advance so that way you can get approved for your loan. One is the certificate of eligibility. I've got videos on the COE and how to, number one, obtain a copy of it, and number two, how it works so you can be educated on that. Obviously, we're going to need a copy of your DD-214 as well. Gather those two forms. Make sure that you get them to me as your mortgage originator. In addition to that, there's going to be other income documents that we need to kind of bring from you, right? So it's going to be W-2s, right? Two years of W-2s, two years of tax returns, two months of bank statements. Think of it as the rule of twos. And lastly, your most recent two months of pay subs. Make sure that you're getting all of those in advance. Make sure that you also understand that these can really vary dependent upon your specific scenario. And we, as the mortgage originator, might request different documents based off of your scenario, but I feel like that's a pretty good list to be able to go out there and get started. Now that you've got your DD-214, the COE, all of the documents that you've requested or provided, rather, your mortgage lender, now it's like it's time to get out there and start shopping for your home after you've been pre-qualified for a specific amount. And if there's one thing that I could explain to you as a veteran first-time home buyer, it's like we want to make sure that the mortgage is custom tailored to your individual need. Jimmy, what does that mean? Well, simply stated, it means that we want to make sure it kind of fits, right? Maybe like this suit, right? Fits on the shoulders, fits on the sleeve length, et cetera. Well, we want the monthly payment to fit your budget. So it's important that you share with me, Jimmy, I want to spend $2,000 a month on a mortgage payment. And I say, well, roger that. I would estimate that you should be looking at somewhere in the 275 to $300,000 price point. Now you can go out and confidently start shopping for homes that are within your budget because you might be pre-qualified for more, but it's like, Jimmy, I don't want to be house poor and I don't want to spend that. So we need to make sure that we're setting you up for success. Now, I want to talk a little bit about the costs associated with the acquisition of a home. Good to go? This is important for us to remember. Now, VA loan, while it doesn't require any money down, there's still costs that you and I as veterans have to pay to buy a house. These are referred to things like closing costs, title, escrow, appraisal, the fixed costs that it takes a mortgage lender to originate your loan. So here's a good general rule of thumb that I'll give you. Anywhere from 2% to 3%. Now, again, this is a general rule of thumb. It could be more, it could be a little bit less, but 2% to 3% of the purchase price that you will want to budget for in advance to ensure that you can pay these monies due at the close of escrow. Close of escrow means, simply stated, the closing of your home. When you go to the title company and you sign all of the documents and you give them the check, 24 hours or less, the home is yours. Now, you're starting to build and create wealth through the acquisition of real estate, utilizing your VA loan. Now, I'm going to bring you guys into the camera here for just a second. Say this, I want you to understand, veterans, that you can have more than one VA loan at a time. This is important for you to know because I want you, I always feel like Uncle Sam when I say that, but I want you to begin to build and create wealth utilizing your VA home loan benefit. In my industry, we do a poor job of explaining to veterans because if you've used, let's just say, 300,000 on your first home, well, now you've got left over another 426,200 to use on another home as an example. Okay? So, from start to finish, I'm going to give you just a kind of general rule of thumb here. Once again, you could expect to see, once you're under contract on a home, roughly 30 days before you close. So, if you're getting ready to go out, or at the very least, if you're kind of preparing for your upcoming purchase, I think it's a good idea to speak to somebody like myself, a mortgage loan originator, roughly 60 days in advance before you go out shopping. Generally speaking, a prequalification form is good for 120 days. It's good for me, as your mortgage originator, to see your loan file in advance so that way, if there's anything that we need to address, we can make sure that we're handling it before you go out and start shopping for a home. Good to go? So, that's a little bit about VA loans, and in particular, for first-time home buyers, a overall review of the process. If there's anything that I did not cover that you guys have questions about, I want you to know that you could always just drop a comment down below. You could always email me, jimmy at valoansforvets.com. And guess what, I'm not hard to find. Good to go? So, if I can personally assist you with building and creating wealth, utilizing your VA home loan benefit, I want you to know that I would be honored to be a resource for you. Jimmy at valoansforvets.com. Talk to you soon.