Disabled veteran discusses loan options with female loan officer at desk

Loans For Disabled Veterans: VA Loan Benefits

6-minute read

Almost one-third of all military veterans between the ages of 21 and 64 report that they have some kind of disability, according to the Americans with Disabilities Act National Network. The employment rate for these veterans is low compared to veterans without disabilities and the general civilian population.

Are you a disabled veteran or know one in need? If so, we’ll walk you through the steps for securing a VA loan.

What Is A VA Loan?

VA loans are a type of military loan that mortgage lenders issue to qualified veterans and spouses. They’re backed by the government – specifically, the Department of Veterans Affairs (VA). The VA does not issue VA loans, but they do determine who may qualify for one and which lenders can issue them. This means that VA loans pose less of a risk to lenders because they’re backed by a government agency.

How Do VA Loans Work?

VA loans are a powerful tool for veterans who receive disability payments or who have a low credit score. Most of the steps in the VA home buying process are the same as when you buy a home with a conventional loan. However, VA loan recipients have the added benefits of a 0% down payment, more relaxed approval standards, lower interest rates on average and faster approval. If you think a VA loan is right for you, here’s the process you’ll go through to get your loan:

Make sure you qualify. Before you start house hunting, make sure you qualify for a VA loan. We’ve included a set of qualifications in the next section. Double-check that you meet at least one qualification before you go to the next step. 

Secure a Certificate of Eligibility. A VA loan Certificate of Eligibility (COE) is an essential part of your VA loan application. A COE tells lenders that they may legally issue you a VA loan. You can get your COE by applying through a VA-approved lender or applying online through your VA eBenefits portal, or you can fill out and mail VA Form 26-1880. 

Get a preapproval. Loan preapprovals are a type of preliminary financial analysis that lenders use when they determine whether you have the income and credit history to be a viable loan candidate. VA resources can help you find a lender who’s qualified to issue VA loans near you. After you fill out a preapproval request, lenders will check your credit and verify your income. Your lender will then issue you a letter that lets you know the value of the loan you qualify for. You can use this letter to begin searching for homes within your price range.

Put in an offer on a home. Once you find a home you like that’s in your price range, put in an offer to buy the home. The seller may accept your offer, reject the offer or counteroffer. Once you and the seller agree on a price, a REALTOR® or real estate attorney can help draw up a contract.

Undergo VA appraisal and underwriting. Underwriters from the VA assess your finances and make sure you qualify for a VA loan. The VA will also require an appraisal before they approve the loan. VA loan appraisals are slightly different from standard mortgage-required appraisals. When you buy a home with a private loan, the lender requires an appraisal because they need to know that they aren’t loaning you too much money for the property.

VA appraisals are stricter than conventional loans. During a VA appraisal, the appraiser will check to make sure that the home is sanitary, structurally sound and move-in ready with minimal repairs.

Close the deal. Once the VA appraiser says that your new home is safe and sound, it’s time for you to sign on your new home, get your loan, and receive the keys to your new property.

Who Qualifies For A VA Loan?

Not just anyone who has served in the Armed Forces qualifies for a VA loan. You must meet at least one of the following criteria to qualify:

  • Served 181 days of active service during peacetime.
  • Served 90 consecutive days of active service during wartime.
  • Served more than 6 years of service with the National Guard or Reserves.
  • Are the spouse of a service member who lost their life in the line of duty or as the result of a service-connected disability. You cannot have remarried. 

VA Loan Benefits For Disabled Veterans

In addition to standard VA loan benefits (like faster approvals and zero down payment requirements), disabled veterans also have access to other benefits as well.

VA Funding Exemption

Most veterans who secure a VA loan must pay a VA funding fee during closing on top of their other required closing costs. The VA funding fee ranges from 2.15% – 3% of the mortgage’s value, depending on the veteran’s income. Disabled veterans have a VA funding fee exemption, which means that they don’t have to pay any form of VA funding fee during closing. To qualify for the exemption, you must currently receive some form of disability benefits – your level of disability is irrelevant.

This may not sound like a big deal, but this exemption can save veterans or their surviving spouse thousands. For example, if you buy a home worth $200,000, you would usually pay between $4,300 – $6,000 in VA funding fees when you close. Disabled veterans can completely avoid this fee.

Access To Specially Adapted Housing Grants

Do you have a disability that affects your mobility or sight? You may qualify for a Specially Adapted Housing (SAH) grant. SAH grants can go toward constructing a special home that’s individually designed to fit the needs of the disabled individual, or they can allow you to modify an existing home to make it more accessible. SAH grants can also go toward the unpaid balance of an adapted home that was already purchased without VA grant assistance.

For 2019, you may qualify for a grant of up to $85,645, and you may use the grant up to three times as long as your disability qualifies. Because the SAH is a grant and not a loan, you don’t need to pay back the money you receive from the government.

Access To Other Adaptation Grants

Disabled veterans may also may also qualify for a Temporary Residence Adaptation (TRA) grant to add modifications to your property that make it easier for you to navigate if you live with a family member. Like SAH grants, you won’t need to pay back your SAH or TSA grant, which makes them a powerful tool for veterans with mobility-related disabilities.

Property Tax Exemption

Property taxes are taxes that you pay to your local community to fund things like libraries, fire departments, and local road and development projects. Disabled veterans property tax exemptions can lower the amount you must pay in property taxes.

These tax exemptions aren’t a federal program, and they vary by state, so make sure you check with your local VA office to learn more about what kind of exemptions you’re eligible for. Some states offer an exemption to all veterans, while other states limit this benefit to veterans who are currently receiving disability payments. Disabled veterans are 100% exempt from property taxes in some states.

Summary

VA home loan benefits make it easier for veterans to find a mortgage lender, especially if your upcoming home purchase is your first. VA loan recipients can take advantage of a zero-down loan, more relaxed approval standards, lower interest rates on average and faster approval. VA loans are a much more affordable option for most veterans when compared to other loan types.

You must be sure you qualify, then follow these steps: secure a Certificate of Eligibility, get a preapproval, put in an offer on a home, undergo a VA appraisal and underwriting, then close the deal. In addition to standard VA loan benefits, disabled veterans also have access to other benefits as well, such as funding exemptions and housing grants.

Our Home Loan Experts can help if you’d like to learn more about VA loans and offers available to you. You can start by applying for a VA loan online today or speak with one of our Home Loan Experts by calling (800) 785-4788.

Our team is always happy to help those who have served our country learn about the benefits they’re entitled to and how they can take advantage of a lower down payment and monthly mortgage rate.

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