VA Loan Benefits: Pre- and Post-Home Purchase Advantage

VA loans serve as a lifeline for eligible service members, veterans, and their families, enabling them to realize the dream of homeownership. With an array of unparalleled benefits, VA loans are a testament to our nation's commitment to supporting those who have served. Let's explore the multitude of advantages that VA loans offer and how they make homeownership more accessible for veterans.

1. No Down Payment:

• Eligible borrowers can purchase a home without a down payment, making homeownership accessible, especially for those with limited savings.

• This does not exempt the borrower from closing costs.

  2. Competitive Interest Rates:

• VA loans often feature competitive interest rates, potentially saving borrowers money over the loan's duration compared to conventional loans.

  3. No Private Mortgage Insurance (PMI):

• VA loans typically waive the requirement for private mortgage insurance (PMI), resulting in lower monthly mortgage payments. (Private Mortgage Insurance (PMI) is a type of insurance that lenders typically require borrowers to purchase when they have a home loan and make a down payment of less than 20% of the home's purchase price. PMI protects the lender in case the borrower defaults on the loan. If the borrower stops making payments and the lender forecloses on the property, PMI reimburses the lender for any losses incurred. While PMI benefits the lender, it does not provide any protection or benefits to the borrower. Once the borrower's equity in the home reaches 20% (either through payments or appreciation), they can request to cancel PMI.)

  4. Flexible Credit Requirements:

• VA loans have more flexible credit requirements compared to other home loans, broadening access to homeownership for a diverse range of borrowers. (Keep in mind if you have a cosigner, who's not a veteran, with better credit they cannot be the primary person on the loan.)

  5. Closing Cost Assistance:

• VA loans may offer assistance with closing costs, alleviating upfront expenses associated with purchasing a home.

• Disabled veterans are entitled to have several closing costs covered at no charge.

• Additionally, if needed, veterans can also receive a credit at closing to provide further assistance.

  6. Property Tax Exemption:

• Veterans can qualify for a valuable property tax exemption post-home purchase, offering further financial relief. (Following the purchase of your home, veterans are eligible for a valuable tax exemption, provided they possess a DD214 form containing a Special Additional Information section. To obtain a certificate of eligibility for your county assessor's office, simply contact your State Veteran Benefits department. It's important to note that this exemption does not take effect until the necessary paperwork is submitted.)

  7. Reuse Benefit:

• Eligible borrowers can reuse their VA loan benefit for subsequent home purchases, subject to specific criteria.

  8. Second-Tier Entitlement:

• VA loans offer second-tier entitlement, granting additional borrowing power to veterans seeking to purchase another home without fully paying off their previous VA loan. (This option can be a valuable resource for veterans who have utilized their VA loan benefit in the past and wish to purchase another home without having fully paid off their previous VA loan. The VA imposes a maximum loan amount per veteran, ensuring that veterans can retain their existing homes if their total combined loan balances fall below this limit. However, when purchasing a second home, veterans are required to occupy the new property. It's important to note that the loan amount for the second home cannot exceed the established limit set by the VA.) 

  9. No Prepayment Penalty:

• Borrowers can pay off their VA loan early without facing prepayment penalties, providing flexibility and potential interest savings.

  10. Streamlined Refinance Options:

• VA loans offer streamlined refinancing options, simplifying the process for borrowers to obtain better loan terms. (i.e. Interest Rate Reduction Refinance Loan (IRRRL), making it easier and more cost-effective for borrowers to refinance their existing VA loan to obtain a lower interest rate or switch from an adjustable-rate mortgage to a fixed-rate mortgage.)

  11. Assistance for Disabled Veterans:

• VA loans provide additional benefits for disabled veterans, including funding for home modifications to accommodate disabilities.

• Veterans rated 70% to 100% disabled may be eligible for the Disabled Veteran Property Tax Exemption, subject to county-specific criteria.

  12. Backing from the U.S. Department of Veterans Affairs:

• VA loans are backed by the U.S. Department of Veterans Affairs, instilling confidence in lenders and potentially enabling more favorable loan terms for borrowers.

In summary, VA home loans offer a comprehensive suite of benefits that facilitate homeownership for eligible service members, veterans, and their families. From eliminating down payments to providing flexible credit requirements and beyond, VA loans serve veterans all around as a reliable program for their home loan needs. With the backing of the U.S. Department of Veterans Affairs, VA loans pave the way for financial stability and security for our veterans on their homeownership journey.

Please note for local requirements talk with a professional loan advisor, a real estate agent, or the VA.

For the long version of your DD214 to have for tax exemption with “Special Additional Information”: Veterans' Service Records | National Archives

In the state of New Mexico the link for tax exemption benefits: State Veteran Benefits | NM Department of Veterans Services (nmdvs.org)