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Buying a Home with Your VA Eligibility: Part One

Are you Eligible?

Being in the military does not guarantee a person qualifies for a VA Home loan. Criteria are primarily based on time in service or discharge for a service-connected disability. The service requirement timeframes are relatively short, ranging from 90 total days, 181 continuous days, or 24 continuous months of service, depending on when you served. These timeframes are overlooked if a person is discharged in a lesser time served due to a service-connected disability. National Guard and Reservists are also eligible for a VA Home loan if they have completed six years of honorable service, are mobilized for active-duty service of at least 90 days, or are discharged because of a service-connected disability. Surviving spouse programs are also available and require the spouse to have a CEO (Certificate of Eligibility) for their deceased veteran. 

What does it cost to buy a home?

A veteran home buyer will have different types of fees that depend on where the home purchase is. There are title fees, loan fees, state taxes, pro-rations, and initial contribution fees for HOA communities in Florida. All these fees are VA Allowable fees, which means the veteran can be (and will be) charged these fees. Often, a veteran believes they can purchase a home for zero costs out of pocket because the VA Loan is a zero down payment loan. However, closing costs and pre-paid items like insurance, taxes, and interest will be charged to the veteran. When combined, closing costs and pre-paid items can equal anywhere between $ 3,000 and $20,000, depending on the community and the price of the home. 

When in the process is this money due?

When a VA buyer enters a contract, they must make an escrow deposit. This amount can vary but is typically 1% of the home purchase price. Unless otherwise negotiated, this deposit is due within three days of contract execution. Additional funds are needed immediately to cover the cost of any home inspection needed or required for the loan. In most cases, inspections must be completed within 10 to 15 days of contract execution, and the inspection cost is due at the time of service. Lastly is the appraisal. Depending on the mortgage lender, payment may be required when the appraisal is ordered. Once a VA homebuyer has paid their escrow deposit, paid for inspections, and appraisal, they likely will only have additional funds out of pocket on the closing day. 

What happens to the escrow deposit?

Depending on the terms of the contract, the escrow deposit will likely apply to any monies owed by the buyer at closing. Therefore, if the escrow deposit was $3,000 and the buyer owes $5,000 at closing, the buyer would need to bring an additional $2,000 to the closing table. 

How does a person know what closing costs will be?

It is vital to have an established relationship with a trusted mortgage lender who can ‘run the numbers’ on any potential home purchase. For the lender to establish the most accurate estimate of closing costs and pre-paid items, they must anticipate insurance and taxes for the home and obtain averages for standard fees like title fees. Once the lender has estimated all fees, they can provide a cost worksheet that breaks down all home purchase expenses. 

Are there items that cannot be estimated?

Depending on the closing timeframe, the lender may be unable to lock in an interest rate. Interest rates can vary daily, so this expense can change until a rate is locked. Furthermore, insurance costs are estimates until a policy is bound. Lastly, taxes for a potential mortgage are based on the prior year’s tax bill. It is crucial to understand that a home purchase will force a tax value reconsideration within the county of the home. This re-evaluation could cause a home’s property taxes to increase after the first year of ownership, thus raising a monthly mortgage payment. 

Toni Hedstrom, PA

Licensed Agent / LIC #SL3240813

Compass Florida, LLC


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