First, let me say that I am not a financial guru nor am I a loan expert or broker of any kind. This is common information you can find on the internet if you search for it.
As I mentioned a few weeks ago, Mike and I applied for our first VA home loan. It was slightly terrifying, but not overly difficult, thanks to my meticulous record-keeping from years past. If you’re thinking of buying a home with a VA loan, here’s exactly what you’ll need. I am unsure how this differs from a regular home loan, as I’ve never applied for one, so if you are on the fence about which one is better, you might do some research.
A VA loan requires no down payment and you’ll pay no PMI. A regular home loan requires a 20% down payment if you want to avoid Private Mortgage Insurance (PMI). Financial gurus will tell you not to buy a home if you don’t have the down-payment, because PMI is bullcrap and you don’t need that in your life.
Benefits of a VA Home Loan
First, let me quickly outline the benefits of a VA home loan. As I mentioned above:
- VA home loans do not require a down payment. (But you can make a down payment if you want.)
- VA home loans have no PMI (Private Mortgage Insurance). This is because the VA backs about 25% of the loan.
- You can still qualify (though not guaranteed) if you have a low credit score.
- Interest rates tend to be more competitive.
- If you can’t make payments due to financial hardship, the VA may help you (for a short time).
The above reasons are why so many military members and veterans use VA home loans instead of traditional ones. Mike and I chose to apply for a VA home loan because there is no down payment, no PMI, low interest rates, and renting in Denver is ludicrously more expensive than buying.
Home values are still on the rise in Colorado, though slowing, and we believe that even if we don’t “make a profit,” we will break even if we have to sell. We’ve also considered keeping the home and renting it out to other military members when we are sent somewhere else. Who’s to say we won’t want to move back to Colorado after we’re done? Of course, we’re also considering bringing in a renter, even if just for a few months. I have several friends from work who might want to live in one of our rooms until they can save up a bit more money after moving out of the Air Force dorms.
No matter what happens, we’re very excited about having our own home. When I saw all the things we needed for the application, I freaked out a bit. Who keeps all of their W-2’s from years past? Thankfully, I had! I have kept all of our tax information since before Mike and I even got married. Talk about a determined girlfriend. I take care of my man, what can I say?
Without Mike’s income, I would have been eligible for a loan of $180,000. While that may sound like fortune’s, in Denver, that won’t even buy you a nice condo. Thankfully, together we can easily afford up to $300,000, and we were pre-approved for even more than that! Sadly, even that won’t get you much. Two years ago, you could buy a lovely home for around $270k. Now those homes are selling at $300-325,000.
So, if you’re thinking about getting a VA home loan, make sure you have all these documents before starting the process. There’s no need getting your hopes up only to find you don’t have the correct paperwork.
Documents You’ll Need to Apply for a VA Home Loan
- Copy of Picture ID(s)
- Most recent 30 days pay stubs for each employed applicant
- Copy of DD-214 or an LES (depends on bank/broker)
- 2 years W-2s for each employed applicant
- 2 months bank statements (all pages front and back as applicable) for all accounts – must have enough money in account(s) to prove you have the money you plan/need to bring to closing
- Home insurance (agent and contact information)
- Last year’s tax return
Seem like a lot? It can be, especially if you’ve had more than a few jobs in the previous two years. Still, the work is worth it if you are ready to branch out and buy your own home.
Let me know if you have any questions going through the VA loan process. I’m currently in the thick of it, and I’ll answer any questions I can.