Home Buying Guide for Veterans in Minnesota
The charming state of Minnesota boasts gorgeous outdoors and beautiful cities; moreover, military retirement pay tax exemptions make living here an attractive option for many veterans.
If you are currently serving (or have previously served) the US military and are thinking about buying a home then it's important that as a military borrower you understand all your military benefits and consider a VA loan. This quick guide will help you navigate the process.
Know the Benefits of a VA Home Loan
VA loans were established in 1944
to give privileges to the American military and help them achieve
homeownership. It is a type of home loan guaranteed by the Department of
Veterans Affairs. However, remember that private lenders issue VA mortgages,
such as banks or mortgage firms, and not the Department of Veterans Affairs.
Therefore, if you are purchasing a property in Minnesota, you need to find a
licensed VA lender in your locality to make the loan.
Although VA loans are an excellent choice for first-time homebuyers, they are also a great alternative to refinance an ongoing mortgage or make home improvements to your existing home because of their unique benefits.
The advantages of a VA loan include the following:
- Zero down payment: A down payment is not required when financing with a VA loan; therefore, you can purchase a property without saving a significant amount for a down payment.
- Lower interest rates: Since the government backs the VA loan, it offers lower interest rates than conventional mortgages. However, the rate you will pay is still based on your situation.
- No required monthly insurance premiums: A VA loan spares you hundreds of dollars monthly which otherwise goes to insurance premiums.
- No penalty for repayments: If you decide to sell or refinance in the future, you can do so without paying fines. However, cash-out finances may work under different conditions.
- Lower fees: If you have a service-connected disability, this will further qualify you for reduced or waived fees.
- Flexible funding fee payment option: A funding fee is a one-time payment made by the borrower for the VA loan. You can pay this in full at closing or include it in the loan amount that you pay off over time.
- No high credit score requirement: Even if your credit score is not perfect, you can still be eligible to get a VA loan.
- Up to 100% cash-out for refinancing: You can use your property’s value to get a VA cash-out to pay off other expenses such as high-interest debts, home repairs, or refinance a non-VA loan.
- No Loan Limits: Minnesota does not impose loan limits to VA borrowers with full VA loan entitlements and can therefore borrow as much as the lender is willing to lend. However, borrowers without full VA loan entitlements are still subject to the state’s limit.
Taking into account these facts is enough reason to secure a VA loan.
Below are the steps to lead you through the process:
Find a VA-approved Lender
When selecting a VA lender, start
by distilling those who focus on VA loans and have extensive experience in this
affair. Dealing with such professionals will give you an easier and faster
mortgage process.
Lenders rates are computed based on your financial numbers, which include your credit score and debt-to-income ratio. Specific lenders may require a minimum credit score. Shopping for more than just one lender will ensure you get the most competitive rates that suit your current situation - however, our partners at New American Funding, Team Jondahl, have always provided hands-on guidance in this arena and have some amazing results for our clients.
We encourage you to reach out to Maria Jondahl and her team for more details, and let her know that Team Homes By Ash told you to call for white glove service!
Acquire a Certificate of Eligibility
By considering your military service, your chosen lender can help you secure a Certificate of Eligibility based on your entitlements from the Department of Veterans Affairs.
You can get a Certificate of Eligibility online through your lender’s portal or the va.gov website.
Eligibility to a VA loan requires meeting one of the following requirements:
- 90 days of wartime service
- 181 continuous days of peacetime service
- 6 years or more of service in the National Guard or Reserves
- A surviving, and un-remarried spouse of a military member who has a service-related disability or has died in the line of duty.
Get a Pre-Qualification for Your Loan
This step is not a requirement in
the loan process but is beneficial in supplying you with a ballpark figure on a
price range for your home purchase. See this as a consultation meeting with
your VA loan representative, which involves you giving vital information such
as your income, employment, marital status, and credit history.
Upon evaluating these factors, your VA professional can advise whether certain aspects of your financial status may require improvement before you can qualify for a VA loan.
Go House Hunting
Working with a qualified real
estate agent specializing in VA loans will ensure you enjoy your full military
benefits. House hunting is the most exciting step, and you can easily get
carried away. However, by utilizing the help of a real estate professional, you
can find the right property.
Since they know special considerations on fees and costs that apply to VA loans, they can negotiate with the seller on your behalf.
Sign a Purchase Agreement
Once you have decided on what
property to purchase, you will be required to sign a contract of sale serving
as a legally binding agreement between you and the seller specifying the
purchase terms.
If earnest money or a deposit is made for the property, ensure that your agreement includes contract contingencies and terms in refunding deposits. Doing so will prove helpful in cases of financing problems or when the seller fails to serve the agreement. Again, this will work for your protection.
Run a Home Inspection and Get an Appraisal
Home appraisals are a requirement
in VA loans. Your lender will order an independent VA appraiser to do the job.
It is done by assessing a property’s value and marketability and ensuring it is
structurally safe.
Your lender will then finance the
property's appraised value or the purchase price, whichever is less.
On the other hand, a home inspection is a more comprehensive check on a property’s major components and structure. However, a VA loan doesn't require it, but many buyers invest in this service to gain a more in-depth idea of a home’s condition.
Once you are under a purchase contract, you can run a home inspection; if you are satisfied with the results and is ready to move forward with your purchase, the next step is to have your lender order an appraisal.
If the appraisal passes VA minimum property value requirements and your lender verifies your eligibility for the loan, you can expect approval of your VA loan from the underwriter.
Shop for Home Insurance
Not all home insurance policies offer the same coverage. While there is no one-size-fits-all plan, there are insurers who specialize in insurance tailored to the lives of military families. USAA Home Insurance and Armed Forces Insurance are some of the top choices of veterans in Minnesota, which hold high ratings from their customers. USAA can provide coverage for uniforms of military personnel on active duty or deployment.
Armed Forces Insurance offers
discounts for station burglar, fire alarm and gated or guarded community
discounts, windstorm mitigation, new roof credit, and even companion policy
credit for insurance bundles. In addition, their endorsement options include:
- Additional dwelling coverage.
- Personal property replacement coverage.
- Personal injury coverage.
- Identity theft expense coverage.
We also recommend you shop the insurance benefits because sometimes you can find comparable benefits at better rates. If you'd like help finding a trusted insurance broker in the area, reach out to our team for a referral.
Close on Your VA Loan
The final stage of your mortgage
is when a property is legally transferred to your name. This requires signing
documents confirming your loan agreement, providing proof of home insurance,
and paying closing fees if there are any.
After this step, you will get the keys to your new home and enjoy the American Dream of being a homeowner.
