Unlocking the Door to Homeownership with Kelsey: VA Loans and Your Entitlement Explained

As a military spouse and Realtor, I’ve personally navigated the home buying process twice using VA loans. We bought our first home in Hope Mills, NC when we first PCSd here in 2012, and then in 2014, we built our dream home in Cameron, NC, on the northwestern side of Fort Bragg, using a land-to-perm VA loan while keeping our first home as a rental property. I know firsthand how valuable this benefit is, and I’m here to help you understand how it works, clear up the myths, and guide you through the process.

What is a VA Loan?

A VA loan is a mortgage loan backed by the U.S. Department of Veterans Affairs (VA). It’s designed to help active-duty service members, veterans, and some surviving spouses purchase a home with little to no down payment, lower interest rates, and more favorable terms than traditional loans.

One of the best things about VA loans is that they don’t require private mortgage insurance (PMI), which is typically required for loans with a down payment of less than 20%. This can save you a significant amount each month and make homeownership more affordable. By eliminating PMI, a VA loan can help you keep your monthly payments lower, allowing you to build equity faster. Plus, the VA sets limits on how much lenders can charge for closing costs, which also helps lower your overall expenses.

Understanding VA Loan Entitlement

Your VA loan entitlement is essentially the amount of money the VA will guarantee for your loan. This entitlement determines how much you can borrow without needing a down payment. The good news? You might not even need to use all your entitlement for a single purchase, and it can be restored once the loan is paid off, meaning you could potentially use your benefit multiple times.

There are two types of entitlement:

1. Basic Entitlement: The basic entitlement is typically up to $36,000. This guarantees the first portion of your loan if you default, but it doesn’t represent the total amount you can borrow.
2. Bonus Entitlement: This is additional entitlement that allows you to borrow higher amounts without a down payment, depending on the county loan limits where you’re buying. For most areas, you can borrow up to the conforming loan limit (around $726,000 in most counties as of 2023) without a down payment.

The amount you can borrow is based on your entitlement and the home’s location, so make sure to talk to your lender about your specific entitlement and eligibility. If you need an amazing lender recommendation, I’d be happy to connect you!

Myths About VA Loans You Should Know

There are a lot of myths about VA loans that might make you hesitant to use your benefits. Let’s debunk some of the biggest ones!

Myth #1: VA Loans are Only for First-Time Homebuyers
This is false! You don’t have to be a first-time homebuyer to use a VA loan. If you’ve used your entitlement before and repaid the loan, you may still be eligible to use your VA benefits again. You can even have multiple VA loans at once if you meet the qualifications.

Myth #2: VA Loans Take Longer to Close
Many people believe VA loans take longer to process than conventional loans, but this isn’t always true. While it’s true that there are extra requirements and paperwork involved with VA loans (such as a Certificate of Eligibility and the VA appraisal process), lenders who specialize in VA loans are familiar with these requirements and can often close quickly. Timing can depend on the lender and the complexity of the transaction, but a VA loan can close just as fast as a conventional loan if handled correctly.

Myth #3: You Can Only Buy a Primary Residence with a VA Loan
While VA loans are primarily meant for primary residences, you may still be able to use the loan for other property types. For example, if you're purchasing a multi-unit property (up to four units), you could live in one unit and rent out the others. You can also use a VA loan to refinance your existing home.

Myth #4: You Need a Perfect Credit Score for a VA Loan
One of the most common misconceptions is that VA loans require a perfect credit score. While credit score is still a factor in any loan application, VA loans are more forgiving when it comes to credit history. You can still qualify for a VA loan with a lower credit score compared to conventional loans, though most lenders will look for at least a 620-640 score to increase the chances of approval.

Myth #5: You Have to Pay a VA Funding Fee Every Time
The VA funding fee is a one-time cost that goes toward funding the VA loan program and helps ensure the program stays viable for future generations of service members. While it’s a requirement for most borrowers, you may be eligible for a waiver if you have a service-connected disability. Even if you aren’t eligible for the waiver, the fee is typically lower than what you’d pay for private mortgage insurance (PMI) or other loan types.

The Bottom Line: VA Loans Are a Powerful Tool

Having used the VA loan program myself, I can personally attest to how powerful this benefit is for military service members, veterans, and their families. Whether you’re buying your first home, refinancing, or even building a home like I did, the VA loan can make homeownership more affordable and accessible.

If you're interested in learning more about how a VA loan can work for you, or if you’re ready to explore your home buying options in the Fort Bragg area, I’m here to help! My goal is to ensure that military service members like you have the support and guidance you need to navigate this process smoothly and confidently.