Using your VA loan benefit while serving on active duty can be a game-changer for military personnel seeking homeownership. VA loans, backed by the Department of Veterans Affairs, provide a range of benefits, including no down payment and competitive interest rates.
These features make VA loans particularly attractive, even for active-duty service members who face unique challenges like frequent relocations.
In this article, we’ll explore how active-duty military can take advantage of the VA loan program, examine key requirements, and share practical tips for navigating the home-buying process.
In this Article
Understanding VA Loan Benefits
VA loans are designed to make homeownership more accessible for veterans, active-duty military members, and qualifying spouses. Unlike conventional loans, VA loans don’t require a down payment, and they don’t charge private mortgage insurance (PMI), which can significantly lower monthly payments. In addition, VA loans often come with lower interest rates, making them a cost-effective way to purchase a home.
“The VA loan program offers unmatched flexibility and affordability, allowing active-duty service members to build equity even as they serve,” says Mark Taylor, Director of Lending at Valor Home Finance.
How Active-Duty Service Members Qualify for a VA Loan
Qualifying for a VA loan while on active duty is relatively straightforward, but there are a few key requirements that must be met:
- Certificate of Eligibility (COE): The first step is obtaining a Certificate of Eligibility (COE) from the VA. This document proves that you meet the service requirements for a VA loan. Most lenders can help you obtain your COE during the loan application process.
- Sufficient Credit Score: While the VA does not set a minimum credit score requirement, most lenders look for a score of at least 580-620. Building and maintaining good credit is crucial to securing favorable loan terms.
- Debt-to-Income (DTI) Ratio: Lenders often look for a DTI ratio below 41%, though some may allow higher ratios if you have compensating factors like a strong credit history or significant savings.
Using Your VA Loan Benefit for a Primary Residence
The VA loan program is specifically designed for primary residences, meaning the home you purchase must be your primary place of living. However, active-duty service members may have questions about how this works, especially if they anticipate relocating frequently.
- Occupancy Requirement: Typically, you must occupy the home within 60 days of closing. However, for active-duty service members, the VA allows flexibility, recognizing that military service may prevent immediate occupancy. In such cases, a spouse or dependent can satisfy the occupancy requirement.
- PCS and Renting Out the Home: If you receive a Permanent Change of Station (PCS) order, you can convert your VA-financed home into a rental property and use your remaining VA loan entitlement to purchase another home in your new location. This is a great way to build a real estate portfolio over time.
Current Housing Market Data for VA Loan Users
As of late 2024, the U.S. housing market has seen a mix of cooling price growth and fluctuating interest rates. The average 30-year fixed-rate VA loan stands at around 5.3%, slightly lower than the national average for conventional loans, which is 5.7%. These favorable rates make VA loans an attractive option for active-duty service members looking to buy now.
VA Loan vs. Conventional Loan Rates (October 2024)
| Loan Type | Average Rate (30-Year Fixed) | Down Payment Requirement | PMI Required? |
|---|---|---|---|
| VA Loan | 5.3% | 0% | No |
| Conventional Loan | 5.7% | 5%-20% | Yes, if < 20% down |
Practical Tips for Using a VA Loan While on Active Duty
- Get Pre-Approved: Before starting your home search, get pre-approved for a VA loan. This will give you a clear idea of your budget and make you a more competitive buyer.
- Work with VA-Savvy Realtors: Finding a real estate agent who understands the VA loan process can save you time and stress. They can help navigate the unique aspects of purchasing a home with a VA loan, like dealing with VA appraisals.
- Consider the Impact of PCS Orders: If you are expecting a PCS order, think about whether it makes more sense to rent or buy. In some markets, renting may be more practical, but buying a home can help you build long-term equity.
- Understand Closing Costs: While VA loans don’t require a down payment, you’ll still need to budget for closing costs, which typically range from 2% to 4% of the loan amount. Some costs can be covered by the seller or rolled into the loan, depending on the negotiation.
Building Equity with a VA Loan
VA loans allow active-duty service members to build equity in a home without a large initial investment. This is particularly valuable in markets where home prices have continued to rise.
Home Price Trends in Major Military Cities (2023-2024)
| City | Average Home Price (2023) | Average Home Price (2024) | % Change |
|---|---|---|---|
| San Diego, CA | $850,000 | $865,000 | +1.8% |
| Norfolk, VA | $350,000 | $358,000 | +2.3% |
| Fort Hood, TX | $290,000 | $295,000 | +1.7% |
| Jacksonville, FL | $400,000 | $412,000 | +3.0% |
| Colorado Springs, CO | $460,000 | $472,000 | +2.6% |
These price trends show that in many military-heavy markets, home prices have continued to appreciate, albeit at a slower rate than in previous years. For active-duty members, buying now with a VA loan could be a smart move, especially with the potential for future appreciation.
Frequently Asked Questions
Can active-duty military use a VA loan to buy a home?
Yes, active-duty service members can use a VA loan to purchase a primary residence. The VA loan program is designed to help military members buy homes even while they are actively serving.
What is the occupancy requirement for a VA loan?
Typically, the VA requires borrowers to occupy the home within 60 days of closing. For active-duty members, a spouse or dependent can fulfill this requirement if the service member is deployed or stationed elsewhere.
Can I use a VA loan to buy a second home while on active duty?
The VA loan is intended for primary residences. However, if you receive a Permanent Change of Station (PCS), you may convert your current home into a rental property and use your remaining VA entitlement to purchase another primary residence.
What credit score is required for a VA loan?
Most lenders require a credit score of at least 580 to 620 for VA loans, although the VA does not set a specific minimum.
Can I rent out my VA loan-financed home if I get a PCS order?
Yes, you can rent out your home if you receive a PCS order, as long as the home was initially purchased as your primary residence.
Are there any fees associated with VA loans?
VA loans come with a funding fee that helps sustain the program. The fee can be financed into the loan, and it varies based on down payment and previous VA loan usage.
How much can I borrow with a VA loan while on active duty?
There is no maximum loan limit for VA loans, but lenders may have their own limits based on your financial qualifications.
Do VA loans require a down payment?
No, VA loans do not require a down payment, making them accessible for active-duty military with limited savings.
Final Thoughts: Making the Most of Your VA Loan Benefit
Using your VA loan benefit while on active duty can be a great way to secure stable housing, build equity, and invest in your future.
By understanding the requirements, working with knowledgeable professionals, and planning for the possibility of relocations, you can make the most of this valuable home-buying tool.
With the right approach, you can achieve homeownership even while serving, setting yourself up for long-term financial stability.
