The VA loan allows for 100% financing for eligible borrowers. Active duty service members, veterans, and surviving spouses can apply for a VA loan with zero percent down.
Of course, there are additional fees involved with home loans, such as closing costs. But, there are several benefits for disabled veterans that make the VA loan even more appealing.
Keep reading to learn about the 100 percent disabled veteran home loan and the benefits you can expect.
Buying a home is an exciting milestone in life. But it can also be stressful, especially when trying to navigate the various loan options. For disabled veterans, the process may seem even more daunting. The good news is that VA home loans offer significant benefits that make homeownership more accessible for veterans with service-connected disabilities. In this comprehensive guide, we’ll explain everything you need to know about disabled veteran home loans.
What is a Disabled Veteran Home Loan?
A disabled veteran home loan is a mortgage guaranteed by the Department of Veterans Affairs (VA) for eligible veterans with service-connected disabilities, It offers favorable terms and perks like
- No down payment required
- No private mortgage insurance (PMI)
- Low interest rates
- Limited closing costs
- Relaxed credit requirements
These loans help disabled veterans and their families achieve homeownership by removing many common barriers You can use a VA home loan benefit repeatedly to purchase or refinance a home for your personal occupancy
Am I Eligible for a Disabled Veteran Home Loan?
To qualify for a VA home loan as a disabled veteran, you must meet the following criteria:
1. Qualifying military service
You must have at least 90 days of active duty service and a discharge other than dishonorable. The length of service requirements depend on when you served:
- Gulf War era (Aug 1990 – present): At least 90 days active duty
- Post Vietnam era (Sep 1980 – Aug 1990): 181 days of continuous active duty
- Vietnam War era (Aug 1964 – May 1975): At least 90 days active duty
- Post Korean War era (Feb 1955 – Aug 1964): At least 181 days active duty
- Korean War (Jun 1950 – Jan 1955): At least 90 days active duty
Shorter periods may qualify if you were discharged for a service-connected disability.
2. Service-connected disability rating
You must have a VA service-connected disability rating to get a disabled veteran home loan. There is no minimum disability rating required.
3. VA home loan eligibility
In addition to disability status, you must have a Certificate of Eligibility (COE) from VA for the home loan program. This confirms you meet time-in-service and character of discharge requirements.
You can easily request a COE online in just a few minutes.
4. Credit, income, and loan requirements
Like all mortgage applicants, you must meet lender requirements for credit, income, debt-to-income ratio, and loan details. VA loans allow more flexible credit guidelines than conventional mortgages.
What Types of Home Loans Are Available?
VA has several loan programs tailored to disabled veterans:
VA Purchase Loan
This popular option lets you buy a primary residence at competitive interest rates with zero down payment. You can use it for single-family homes, townhomes, condos and even manufactured homes.
VA Cash-Out Refinance
A VA cash-out refinance converts home equity into cash you can use for any purpose. It lets you tap into your equity while refinancing into a new VA loan at lower interest rates or payments.
VA Renovation Loan
Also called a VA construction loan, this combines a purchase loan with funds to improve or customize a home for accessibility before you move in. It’s ideal if you need renovations for disability needs.
VA Interest Rate Reduction Refinance (IRRRL)
An IRRRL refinances your current VA loan into a new one with lower interest for reduced monthly payments. You cannot tap any equity with an IRRRL.
VA Native American Direct Loan
This purchase or refinance loan helps Native American veterans buy, build or improve a home on federal trust lands. Tribal participation is required.
What Are the Benefits of a Disabled Veteran Home Loan?
VA loans offer significant advantages tailored to disabled veterans:
No Down Payment
Unlike conventional loans, VA mortgages require no down payment whatsoever. This removes a major hurdle for veterans who haven’t had time to accumulate savings.
No Private Mortgage Insurance
Conventional loans with less than a 20% down payment require private mortgage insurance (PMI). VA loans skip this added cost, which typically runs 0.5% – 1% of the loan amount annually.
Lower Interest Rates
Thanks to the VA loan guarantee, lenders can offer lower interest rates than conventional mortgages. This equates to significant interest savings over the life of your loan.
Easier to Qualify
VA guidelines are more flexible on credit scores, debt-to-income ratios and credit history than conventional loans. This helps veterans qualify despite financial hardships.
Reusable Benefit
You can use the VA loan guarantee more than once to purchase or refinance a primary home. This makes it helpful at multiple stages of life.
Adapted Housing Grants
Severely disabled veterans may utilize VA grants up to $91,754 (2022 limit) to construct or modify homes to accommodate disabilities.
What Are VA Funding Fees?
VA loans require a one-time funding fee typically 1.4% – 3.6% of the loan amount. This helps VA offset program costs. However, disabled veterans are eligible for reductions:
- 0.5% fee for veterans rated 30% or more disabled
- $0 funding fee for veterans rated 100% disabled or housebound
On a $300,000 loan, this equals savings of $4,200 to $10,800 at closing. Funding fee reductions provide meaningful savings.
How Do I Apply for a Disabled Veteran Home Loan?
Follow these steps to get a VA home loan as a disabled veteran:
1. Get pre-approved
Work with a mortgage lender to get pre-approved. Ask lenders if they offer VA loans. Be sure to ask about disabled veteran fee reductions.
2. Get a Certificate of Eligibility (COE)
A COE confirms your eligibility and remaining VA entitlement. Request one through VA.gov or your lender.
3. Find a home and make an offer
Once pre-approved, start searching for homes within your budget and loan amount. Make an offer when you find the perfect place.
4. Allow time for the VA appraisal
VA loans require an appraisal done to VA standards. It’s more detailed than conventional appraisals.
5. Close on your home
Final loan approval takes 2-3 weeks. You can close once all conditions are cleared and documents signed.
The process is straightforward with an experienced VA lender guiding you.
7 Tips for Disabled Veterans Seeking a Home Loan
Follow these tips for a smooth disabled veteran home loan process:
1. Check your COE status
Confirm you have sufficient entitlement for the loan amount you need. File disability claims early if you need to increase entitlement.
2. Get pre-qualified
Pre-qualification from a lender will save time. Provide all needed documents upfront for efficiency.
3. Search homes priced within your budget
Your pre-approval letter states the maximum loan amount you qualify for. But don’t exceed what you can comfortably afford monthly.
4. Be ready for the VA appraisal
VA appraisals are meticulous. Ensure the home is clean and minor repairs completed prior to inspection.
5. Manage your debt-to-income ratio
Keep credit card balances low before applying for approval. Total household debt obligations cannot exceed 41% of income in most cases.
6. Check on disability grants
Severely disabled veterans should explore adapted housing grants to modify homes for disability needs.
7. Ask lenders about closing cost assistance
Many lenders offer grants and reduced fees for veterans. Inquire about help with closing costs.
Common Questions About Disabled Veteran Home Loans
If you’re considering a VA home loan, you likely have questions. Here we answer some key queries disabled veterans may have:
Can I get a VA loan with bad credit?
Yes, VA guidelines are more lenient toward credit issues than conventional loans. Minimum credit scores can be as low as 580 – 640. Past bankruptcies or foreclosures don’t automatically disqualify you either.
How much does a disabled veteran have to put down?
The beauty of VA loans is you can buy with zero down payment as a disabled veteran. However, you can make a down payment if desired.
What is better, a VA loan or conventional?
VA loans offer better terms overall for disabled veterans. Conventional loans charge PMI and higher interest rates. But conventional loans can allow higher priced homes.
Can a 100% disabled veteran get a home loan?
Yes, severely disabled veterans can qualify for VA’s adapted housing grants plus VA loans at the lowest funding fee tier. Your service-connected rating does not limit loan eligibility.
How often can you use VA home loan benefit?
You
VA funding fee exemption
While all eligible VA loan borrowers can take advantage of the VA loan zero down payment requirement and competitive interest rates, the 100 percent disabled veteran home loan allows disabled borrowers to avoid the VA funding fee and save thousands of dollars on their loan.
The VA funding fee is a one-time payment to the VA loan to help fund the program, lowering the cost of these types of loans for taxpayers since this program doesn’t require down payments or mortgage insurance. This fee costs 2.15 percent of the loan amount and is due at closing. However, every subsequent VA loan after your first comes with a 3.3 percent VA funding fee. Borrowers can reduce their funding fees by making larger down payments, so your actual costs may range from 0.5-3.3 percent of the loan amount.
Borrowers receiving VA compensation for a service-connected disability or those eligible to receive compensation for a disability aren’t required to pay the VA funding fee.
In addition, borrowers may be eligible to receive a refund if they paid a VA funding fee and later were given VA compensation for a service-related disability.
The funding fee exemption can help save disabled veterans thousands of dollars in closing costs. For instance, if your home loan is $300,000 and this is your first time using your VA loan, the funding fee would be $6,450. If you have an exemption, you can save over six thousand dollars when purchasing a home with a VA loan.
If you’re unsure whether you’re eligible for the exemption, we recommend contacting the VA or letting us know, and we’ll work with the VA directly to ensure you get all the benefits the VA loan program has to offer.
Disabled veteran housing grants
The VA offers housing grants for members with service-connected disabilities to help them buy or improve a home, which may include installing ramps or widening doorways.
The Specially Adapted Housing (SAH) grant allows eligible borrowers to buy, build, or change their homes to meet their needs. However, they can only use this grant if they own the home and have a qualifying disability. The SAH grant offers up to $109,986 for 2023.
You may also qualify for the Special Home Adaptation (SHA) grant, which allows you to buy, build, or change a primary residence as long as you plan to live in it for a long time. To qualify for this grant, borrowers or a family member must own the home, and the borrower must have a service-connected disability. The SHA grant offers a maximum of $22,036 for 2023.
You can use either grant up to six times throughout your lifetime, which allows you to take advantage of these benefits every time you purchase a new home with a VA loan. And depending on the changes required to your home, you can use only as much of the grant as you need. If you don’t use the full amount, you can use more later.
You can apply for a disability housing grant to reduce the cost of your loan and changes to your home by logging into the eBenefits platform.