How Much House Can You Afford with a VA Loan?
When you're saving money it can be tempting to buy a lot more than you need and it's no different when it comes to a big purchase like a home.
If you're buying property with your VA loan benefits, you can actually end up saving a lot of money, believe it or not. When your lender approves your loan, it comes with a 25% government-backed guarantee, should you default on repayment of the loan.
There are additional benefits, too: like the fact that VA loans require no down payment, no monthly mortgage insurance, and they're extra lenient about iffy credit scores. (You will have to pay something called a funding fee to support the government's guarantee of your loan, but that can be incorporated into your mortgage, so you don't have to come up with the money upfront, necessarily.)
Here's how to make sure you're taking full advantage of your savings, and to make sure you're only buying what you can afford.
Know what category you're in
VA loans aren't one size fits all. You'll get slightly different benefits depending on your military service.
When you apply for your Certificate of Eligibility, you'll describe your military service, and the VA will offer verification that that description is accurate, based on its internal records. Generally speaking, there are four different categories out there:
- Veterans and disabled veterans
- Active-duty servicemembers
- Surviving spouses
- National Guard or Reserve members
Most people who get a VA loan are required to pay a funding fee, which helps offset any loans that end up defaulting, keeping interest rates low for all users. How much you pay--or if you pay the fee at all--depends on your military category and disability status, so it's important to factor that in when making a budget for your new home.
Use our VA loan calculator to see how your eligibility affects your payment.
Know how much you can afford with your VA loan
Owning a home might be cheaper than renting in your town, but there are other costs associated with it.
That's why it's important to figure out exactly how much you can afford each month. You can use our monthly mortgage payment calculator to estimate how much you'll need to set aside each month for your mortgage.
Then you'll want to add in other costs associated with your home:
- Saving for an emergency fund for big and small repairs
- HOA fees
- Upgrades and maintenance
Once you have all those costs added up, make sure you account for things like groceries, health insurance, and having fun.
What happens when you leave the military?
If you're in the military when you buy your house, you might be relying on housing stipends and other financial benefits to help pay the mortgage and any other home maintenance costs.
But if you don't plan on making a career out of the military what's your plan for when you get out? You may be facing a cut in your income if you decide to go back to school or if you're entering an entirely new field of work.
Be sure you'll still be able to afford your mortgage payment even without your military income.
Still have questions? Get the facts about VA loans.