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The Veteran's Guide to Homeownership

When it comes to buying a house, being a veteran or active-duty service member offers some distinct advantages. Here are the 3 steps it takes to prepare to buy or build your new home. 

 

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Step 1: Prepare your Finances

 

Identify your Timeline

 

Your timeline is an important factor in determining your realistic financial goals that you will be able to achieve before you purchase your new home. Building your new home can take 8 to 10 months, so understanding your timeline is essential to your home buying process.

 

Understand the Cost of Buying a Home 

 

Buying a house costs money, but how much you need depends on the type of financing you're using. Some of your costs and fees may include down payment, deposit, appraisal, inspection and closing costs. Building your house is a great investment and preparing for it is important. 

 

Review your Income, Debts & Buying Power

 

A lender will look at your debt-to-income ratio to determine how much your can afford in your new house. If your current expenses leave you with little money for savings, it would be best if you lower some of your debts before purchasing a new house.

 

Set Financial Goals 

 

The more you can strengthen your financial profile, the better your chances are of getting a great deal and making it to your closing day. A few goals you should strive for to prepare for buying your new home are boosting your savings, pay down existing debts and troubleshoot possible unexpected debts.

 

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Step 2: Understand your Options

 

VA Loans 

 

Who can use it:

          Eligible veterans, active-duty military members, and qualified surviving spouses. The VA doesn’t set a credit score benchmark, but most lenders will have one. A 620 FICO score is a common minimum.

What it's all about:

          VA home loans are backed by the government but issued by private lenders. VA loans offer no down payment requirement, no mortgage insurance, and looser credit requirements. VA loan guidelines account for borrowers whose finances may have been affected by their service. Credit score requirements are typically lower than those for conventional loans, and the program allows for more wiggle room when it comes to debt-to-income ratios, credit scores, and assets. They also tend to have lower average interest rates than other loan types.

What to watch out for:

          The VA loan program is designed to help veterans and military members purchase safe, structurally sound homes they’ll occupy as their primary residence. VA loans are not available for investment properties or vacation homes. A funding fee of no more than 3.3% of the loan amount helps keep the program going and can be paid upfront or rolled into your loan amount. Buyers who receive compensation for a service-connected disability don’t have to pay this fee. 

 

FHA Loans

 

Who can use it:

          Anyone with at least a 580 FICO score (or lower in special cases), adequate income, and at least 3.5% down may be eligible to use an FHA loan.

What it's all about:

          Much like the VA program, the FHA program helps increase access to homeownership through lower down payment options, competitive interest rates, and less rigorous underwriting guidelines. FHA loans also tend to have the lowest minimum credit score requirements of all the loan types. Depending on their individual approval guidelines, some lenders will even allow for exceptions to the minimum credit requirement. The FHA’s 203(k) program allows borrowers to purchase and repair fixer-uppers, lending based on a home’s projected value after rehab work is completed.

What to watch out for:

          FHA buyers pay both an upfront funding fee (called a mortgage insurance premium) as well as an annual mortgage insurance charge. The latter can easily add $150 or more to your monthly mortgage payment, and it’s a cost FHA buyers now pay for the life of their loan, regardless of their equity status.

 

USDA Loans 

 

Who can use it:

          Buyers looking to settle in an approved rural area who have adequate (but not excessive) income and an acceptable credit score can use the USDA loan program. USDA lenders often look for at least a 640 FICO score.

What it's all about:

          Much like the VA loan, the USDA program allows qualified buyers to purchase a primary residence with no money down. USDA-eligible homes are located in what the agency deems qualified rural areas. Buyers need to verify that a property is located in one of these eligible areas. Along with no down payment, another big benefit of USDA loans is that buyers can finance their closing costs.

What to watch out for:

          USDA puts a cap on income for eligible borrowers. These limits vary by region and family size and can change annually. Like FHA loans, USDA loans come with both an upfront mortgage insurance premium and an annual mortgage insurance fee.

 

Conventional Loans 

 

Who can use it:

          Anyone with qualifying credit (in the ballpark of a 660 FICO or higher), adequate income, and a 5% down payment in most cases. Some lenders may offer conventional financing with just 3% down.

What it's all about:

          In terms of credit scores and debt-to-income ratios, these loans have higher barriers to entry than the government-backed options. Conventional lenders are looking for borrowers who have well-established credit, solid assets, and steady income. The upside is that when it comes to the kind of property you can purchase, you’ll have more freedom with conventional financing. That means you can use this type of loan to buy a second home or an investment property.

What to watch out for:

          Buyers putting less than 20% down will pay PMI, or private mortgage insurance, until they build sufficient equity in the property. These fees can easily add $100 or more to your payment every month. Unless you have excellent credit—think 740 or above—a conventional loan may come with higher rates and fees.

 

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Step 3: Find your Dream Home

 

Great Community 

 

Finding the ideal community can be overwhelming, but with Lillian we offer multiple communities to fit your family's wants and needs. Whether you want a fantastic school district for your children, local parks for recreation or a quiet place to retire, we have communities to suite your needs.

 

The Perfect Floor Plan 

 

With over 100 floor plans, finding one the perfect one can be challenging. Our community managers will be able to help you find the perfect floor plan or customize it to your desires. Some of our most popular floor plans are the Juniper, the Abelia and the Riviera, which are offered in many communities.

 

Customizing Details 

 

At Lillian Custom Homes, we welcome custom changes. We want you to love every single detail of your new home. If you love to cook, add a gourmet kitchen! If you enjoy being outside, extend your covered patio! 

 

Best Time to Buy 

 

The best time to buy or build your new home is now! We offer a special Hometown Hero incentive for active military, veterans, firefighters, teachers, nurses, doctors, paramedics, and police officers. 

 

 Interested in learning more about our Hometown Heroes Incentive? Click Here

 

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