Buying a house can be quite challenging, particularly because it involves securing the right mortgage. Fortunately, VA loans offer a more affordable path to home ownership for veterans, military personnel, and their families. Veterans who have sustained injuries or disabilities in the line of duty qualify for special disabled veteran home loan benefits. These benefits aim to address financial and situational requirements for disabled veterans and help them purchase a house.
Eligibility criteria for disabled veteran home loans
Home loans offer valuable financing options for many military service personnel, but they come with few set requirements that must be fulfilled. Military borrowers need to fulfill several criteria to fully qualify for VA home loans.
- Having an acceptable debt-to-income ratio
- Meeting the service standards
- Having a credit score more than the lender-specified minimum
- Residual income
Beyond this, the service members must meet one of the requirements to avail of this loan.
- Served 181 days in active duty during peacetime
- Completed 90 consecutive days of active duty during wartime
- Completed 90 days under Title 32, with at least 30 straight days
- Served over six years in the National Guard
In addition to this, service members must fulfill the additional criteria specified by the lender. They may have to submit the documentation as evidence of the above requirements. Different types of documents may be accepted.
- DD Form 214 or Certificate of Release or Discharge from Active Duty
- Certificate of Eligibility (COE)
- NGB Form 22 or any accepted VA form
Even with a disability rating, individuals still have an opportunity to secure a home loan. VA home loan lenders are able to consider a person’s disability income as a valid source of income for the home loan application process. Further, disabled veterans with a service-related disability (10% or higher) are exempted from paying a VA funding fee, which is a mandatory cost added to every refinance and purchase loan to mitigate losses and support the program’s sustainability.
Application process
When applying, veterans can follow certain steps to secure a home loan.
Secure the certificate of eligibility (COE)
The COE confirms the entitlement to a VA home loan. One can access the COE online through the VA eBenefits portal, request it by postal mail, or obtain it through the lender. Typically, opting for the online application is recommended due to the potential delay associated with postal mail.
Opt for a VA-approved lender
When looking for a lender, one must carefully research various options online to find the best match for their specific needs. Ideally, the applicant must opt for VA-approved lenders with vast experience in home loans. Additionally, it is beneficial to consider a lender who understands the unique needs of a disabled veteran and meets their housing requirements.
Inquire about the lender’s eligibility requirements
Disabled veterans must inquire about the eligibility requirements to ensure they qualify for the loan. Further, one must confirm the fees and interest rates applicable so that they don’t get trapped in a sticky financial situation in the future.
Try to apply for a pre-approved loan
Request a pre-approval with the top lenders and compare the terms to bag the most lucrative offer.
Tips to increase the chances of approval
Work on the credit score
To begin the process, disabled veterans must carefully examine their credit reports for errors, outdated information, or inaccuracies. If they find such errors, they should promptly file a dispute immediately with one of the authorized credit bureaus—Equifax, TransUnion, or Equifax.
Make a down payment if possible
Typically, disabled veterans do not require to make a down payment when opting for a home home. That said, a down payment can reduce the loan amount and amplify the chances of approval significantly.
Be proactive in responding to lender inquiries
Following the submission of a mortgage application, lenders might demand additional information. So, provide all the necessary details in order to prevent unnecessary delays in the processing of the loan.
Benefits of disabled veteran home loans
Exemption on funding fees
Be it a conventional or VA home loan, an extra funding fee is always involved for every type of mortgage. The Department of Veterans Affairs typically applies this fee to cover any probable losses if there’s a loan default. However, disabled veterans are 100% exempt from this fee. So, when a disabled veteran receives compensation for a service-related disability, the VA will waive the funding fee every time they apply for a VA loan. Moreover, the surviving spouses of the veterans who pass away due to a service-related disability or while in service can take advantage of this benefit.
Disability income for the home loans
Disability income implies a significant cash flow for many. Sometimes, it may be the entire living wage. Veterans can employ this income towards their disabled veteran home loan. Further, showing disability compensation as an income increases the DTI (debt-to-income ratio), a pivotal aspect lenders consider when approving the loan. Since this income is reliable and stable, lenders will factor it.
Housing grants
Service members and veterans with disabilities can avail of housing grants crafted by the VA. It can help them modify or buy homes for better accessibility. Typically, there are three kinds of grants.
- The Specially Adapted Housing Grant, (SAH) is a grant for individuals with specific disabilities, such as blindness or limb loss. It applies to only 120 people in a year with disabilities after September 11, 2001.
- A Special Home Adaptation (SHA) grant is available when a family member or veteran has a disability, such as breathing issues or loss of hand.
- The Temporary Residence Adaption (TRA) grant is for veterans who temporarily reside in a family member’s house and require changes.