A Veteran’s Guide to Financing a Home Purchase

At last count, almost 10% of America’s population was comprised of military veterans. It’s a large and diverse community of men and women who have proudly served the country they call home, and who deserve the gratitude of a grateful nation. Despite that fact, however, an alarming number of veterans continue to struggle to make ends meet every day in the country they so selflessly served.

Despite the grim statistics, however, there’s another reality that stands in sharp contrast – almost 80% of US veterans are homeowners. That’s because veterans have a few excellent options to finance the purchase of a home, even if they’re not flush with cash. One option is known as the VA Home Loan program, which has been helping veterans purchase homes since 1944, but it’s not the only available choice. For veterans interested in buying a home, here’s a look at the VA Home Loan Program and some other useful financing options that might help them achieve their dream of home ownership.

VA Home Loans

Even though the VA Home Loan program has been around for a long time, many veterans still aren’t well-versed in the specifics of how it works. First, it is important to realize that the VA doesn’t loan out money; it guarantees home loans to veterans made by third-party lenders that participate in the program. The biggest reason that VA home loans play a role in the vast majority of home purchases by veterans is that they offer significant advantages that standard market mortgages can’t match, including:

• No down payments
• No requirement for mortgage insurance
• Lower-than-average required credit score
• Lower interest rates (sometimes between .5% and 1% under the going market rate)
• Limited closing costs

All in all, there are plenty of reasons that a VA-backed mortgage is the go-to home financing option for veterans. Just as long as the home they’re buying is going to be their primary residence (or one that a spouse or qualified dependent will live in), there’s not much in the way of downsides. There are some conditions, such as the type of home being purchased, inability to meet residual income thresholds, and failure to meet service requirements that can leave some veterans ineligible for the program, but the good news is that there are other options available.

Shared Equity Mortgages

Another kind of mortgage option that can help veterans purchase a home is a shared equity or shared ownership mortgage. As the name implies, it’s a mortgage where the home buyer agrees to share ownership of the home with the loan provider. Basically, the lender finances a portion of the home so that the cost to the buyer is lowered. In exchange, the lender is entitled to a share of the profits whenever the borrower sells the home. While it is an option that’s more common overseas than in the US market, it’s becoming a popular option in larger metro areas, where costs are high and home buyers need more help to afford a home. Even in markets where shared equity mortgages aren’t available, it is sometimes possible to find low or no-interest down payment loan programs, which operate on the same principle.

Veteran Grant Programs

For veterans who can’t secure a mortgage, or who need some extra help covering things like down payments and closing costs, there are a variety of grant programs that could help make their dream of home ownership a reality. They include:

• The Dream Makers Program
• The Military Housing Assistance Fund
• Disabled Veteran Grants

On top of these useful programs, many states offer home buying assistance to veterans in the form of down payment assistance or mortgage payment subsidies. Depending on your location, you could have several helpful options to choose from.

The American Dream

The bottom line is that veterans have plenty of options available to help them buy a home and secure their part of the American dream. Those who choose to explore the options mentioned here or the variety of local and state-run programs aimed at increasing veteran home ownership should find something that suits their specific needs. As an integral part of keeping the American dream alive for others, they’ve certainly earned every opportunity to join previous generations of their military brethren in keeping the home fires burning in a place of their very own.