The VA loan benefit is a great way to buy a home. Did you know that it’s not just a benefit for active military personnel? Military reservists are also eligible as long as they meet the service requirements and can qualify for the loan.
The Military Reservists Requirements
Military Reservists get the same benefits as those that served in the regular military. The exception is that they must serve six years in the Reserves. Active military personnel only have to serve 3 months during wartime or 6 months (consecutively) during peacetime.
In addition, anyone in the Reserves must have an honorable discharge; have retired; or work as a Standby Reserve after their six years of service.
If a Reservist serves enough time, they are eligible to receive their Certificate of Entitlement. You can obtain this certificate yourself or you can ask your lender to do it for you. The latter option is usually the quickest, which is important if you are already in the midst of buying a home.
Qualifying for the VA Loan
Military reservists that are ‘eligible’ for a VA loan aren’t necessarily qualified too. You must prove that you are qualified by proving you can afford the loan.
You’ll need to prove adequate income that covers the potential mortgage payment alongside your existing debts. In addition, you’ll need a specific amount of disposable income (money left after paying bills) each month. The amount you need depends on where you live and how many people are in your family.
You’ll also need to prove financial responsibility. You can do this with a good credit score. According to the VA, you need a 620 credit score. Many lenders require a score as high as 680, though. Lenders can add their own requirements or make the requirements tougher than the VA because they fund the loans. The VA simply guarantees them. In other words, they pay a lender back if you default on the loan.
Paying the Funding Fee
Another major difference between the VA loan for active duty military and military Reservists is the funding fee you will pay. Active duty personnel pay 2.15% of the loan amount for a home purchase. Those in the Reserves pay 2.4% of the loan amount.
Let’s look at how this differs on a $150,000 loan:
- Active duty personnel would pay $3,225
- Reservists would pay $3,600
It’s not a huge difference, but it’s worth mentioning.
Shopping Around for a VA Loan
You are not restricted to a specific lender when you use your VA benefit whether as active military or a Reservist. You are free to go to any VA approved lender. You’ll likely find that there are many throughout your area.
We recommend securing quotes from at least three VA approved lenders before making a decision. This way you can decide which lender offers the best deal. It’s not always the lender with the lowest interest rate, either. Closing costs play a role too. You’ll want to look at the APR to see just how much a loan will cost in the end.
No matter which lender you choose, the loan does not have to go through the VA. They approve specific lenders that abide by their guidelines when writing loans in the VA’s name. This means the process can go as quickly as any other loan would close. You can close as fast as the lender can work, which basically depends on their current workload.
The Benefit of VA Loans
If you aren’t familiar with VA loans as a Reservist, you’ll want to look into them. You can secure 100% financing up to the $453,100 amount as long as you qualify for it. You do not have to put any money down on the home either. This means you could buy a home for as much as $453,100 and not put a penny down on it. All you would have to pay is the closing costs, but even those can get rolled into your loan.
The VA also helps keep the interest rates low by guaranteeing the loan. Generally, if a lender gives a loan to a borrower with a 620 credit score and provides 100% financing, they are going to charge a higher interest rate. It’s a risky loan after all. But, because the VA guarantees it, lenders can be a little more relaxed in their requirements and the rates they charge, giving veterans a great deal on a mortgage.
Military Reservists are eligible for VA loans just like any other veteran. If you served in the Reserves, look into your benefits and see how they can help you buy a home.