A Beginner’s Guide To Using Your VA Loan For the First Time

Are you about to use your VA loan for the first time and feeling a bit unsure? Don’t worry, you’re not alone! Buying a home can be confusing, especially with veteran benefits involved.

I’m Rick Elmendorf, a loan officer with over 30 years of experience, and I’ve been helping our nation’s veterans get through the home-buying process smoothly.

In this post, I’ll share three crucial steps you should take before using your VA loan. Ready to make your first home purchase a bit simpler? Let’s break down the essentials and ensure you’re fully prepared.

If you are not in the mood to read, watch my detailed video on the topic:

Step 1: Know Your Numbers

Using your VA loan benefits means starting with a clear picture of your finances. Let’s explain why understanding these numbers is valuable and essential:

Current Mortgage Climate

The current interest rates are among the highest we’ve seen in years, significantly impacting the affordability of home buying compared to renting. As of now, mortgage rates have spiked due to economic fluctuations.

These mortgage rates are expected to stay on the higher side throughout mortgage rates are expected to stay on the higher side throughout 2025, as predicted by most of the big names in the industry.

Understanding how these could affect your monthly payments and overall loan affordability is crucial.

Why Knowing Your Numbers Matters?

Purchasing a home is more than covering the monthly mortgage. It’s an investment. Analyzing potential rental income or resale value gives a complete picture of a property’s worth. For example, while rent might be lower than a mortgage initially, homeownership allows you to build equity. 

Every mortgage payment increases your stake in the property, converting part of the payment into an investment.

Economic Trends and Home Values

Interest rates have been volatile, especially since the significant rise starting in October 2022. However, history shows us that post-presidential election years often lead to market stabilization and home appreciation.

This historical trend suggests potential for growth in home values, which could enhance your equity faster than expected.

Comparing Renting vs. Buying

This isn’t just about comparing monthly rent to a mortgage payment. When you own a home, part of your expense goes towards the principal, effectively saving money while you spend.

Owning a home also comes with potential tax benefits and the possibility to earn rental income if you choose to move and rent out the property.

Long-term Financial Implications

Let’s consider the long-term scenario using the current high interest rates as a starting point. If you purchase a home at $400,000 and the market appreciates following historical trends, a 10% increase in home value over three years would mean a gain of $40,000 in equity. 

Refinancing when rates drop, as projected, can significantly lower your payments, compounding your savings.

If you’re planning whether now is the right time to buy, remember that the decision should be based on solid math, not gut feelings. Using my purchase worksheet and analysis tools, we can run detailed scenarios personalized to your financial situation.

I’ve created a worksheet designed specifically for maximum VA loan calculations, perfect for first-timers aiming to buy with zero down. Click here to access and use it.

Step 2: Build Wealth with Your VA Loan

Using your VA loan can be more than just purchasing a home. It can be a powerful tool for building wealth. Let’s explore how to use this benefit to secure financial growth over time:

The Stability of Housing Investments

Real estate is generally a stable investment, with historical data showing consistent appreciation over time.

This trend holds especially true in areas with robust military presence, which often have resilient property values due to the constant demand for housing.

For instance, despite the housing crisis during 2007-2008, areas like Northern Virginia, with a significant military and government employee population, experienced far less impact than places heavily affected, like parts of Florida and Arizona.

How to Get Rich with VA Loans?

A great quote to remember here is:

“The best time to buy a house is always five years ago.”

This speaks to the enduring value of real estate as an investment. Here’s a real-world example of how a client of mine used this philosophy to build substantial wealth:

Expanding Property Portfolio

Starting with no money down, he bought his first home in Pensacola. Instead of selling, he chose to rent it out, covering more than his mortgage payment.

As his military service took him to new locations, he repeated this process, purchasing homes under VA terms and renting them out.

Using Multi-Unit Properties

He strategically purchased a multi-unit property, living in one unit while renting out the other. This approach covered his mortgage payments and generated additional income when he moved again, renting out both units.

Growth Through Appreciation

Over the years, the value of his properties appreciated significantly. The first property he bought for $300,000 was valued at over $400,000, demonstrating substantial equity growth without any initial investment besides using his VA entitlement.

Strategic Use of VA Loan Benefits

• No Down Payment and Increased Buying Power: One of the significant advantages of VA loans is the possibility of purchasing homes with no down payment, which allows service members and veterans to retain their savings for other investments.
• Continued Eligibility: VA borrowers can reuse their entitlement for future home purchases as long as the previous loan is paid off, or in my client’s case, the property is turned into another form of income by renting it out.
• Building Long-Term Wealth: By funding multiple properties through VA loans, veterans can create a steady income stream through rentals while benefiting from property appreciation. This strategy effectively builds wealth while providing housing stability during active duty postings.

This approach to using a VA loan demonstrates that with careful planning and strategic decision-making, military service members can use their benefits to secure a place to live and as a strong platform for long-term financial wealth.

Step 3: Get Your Finances in Order

Securing your financial standing is crucial when preparing to use your VA loan. This step ensures you’re ready to move quickly in a competitive market without needing a down payment. Here’s how to get your finances for a smooth home-buying process:

Understand Your Financial Position

• Credit Check: Your credit score plays a significant role, even with VA loans’ leniency towards credit ratings. Knowing where you stand can help you secure better loan conditions.
• Cash Reserves: Although a down payment isn’t necessary with VA loans, having funds for closing costs can enhance your bargaining position. You can negotiate these costs with the seller, potentially minimizing upfront expenses.

Strategic Negotiation with Closing Costs

Understanding closing costs can be a game-changer in your real estate transactions. It’s crucial to approach these costs as a financial responsibility and a strategic influence point in negotiations.

Psychological Advantage of Higher Offers

Consider the psychological impact of the offer amounts in the negotiation process. For instance, suppose one potential buyer submits an offer of $300,000 with no additional requests, while another offers $308,000 but asks for $8,000 in closing cost help.

The net effect on the seller’s proceeds might be the same, but presenting a higher sale price can be more appealing. Sellers and their agents often prefer to announce a higher selling price as it better reflects the property’s market value and boosts supposed market activity.

This strategy plays into the seller’s and agent’s desire to maximize the sale record. Offering a higher purchase price, offset by the seller’s concessions for closing costs, might make your offer stand out because it meets the seller’s financial goals and gives them a bragging point about the final sale price.

Tactical Discussion with Your Lender and Agent

Ensure your real estate agent and lender fully align with your strategy. A united front can effectively communicate the strengths of your offer to the seller’s agent, highlighting the solid financing and readiness to proceed.

Your lender should proactively reach out to the listing agent to confirm the reliability of your financial setup, thereby boosting the seller’s confidence in your offer. Sometimes, buyers do not communicate or interview with the agents, which can be a big mistake.

To learn about such common mistakes made by veterans while buying a home, watch the video below:

The Power of Asking

Never underestimate the power of asking for what you need. As highlighted by the old saying, “If you don’t ask, you are not going to receive,” there’s often room to negotiate more favorable terms.

Encouraging sellers to contribute towards closing costs can sometimes result in a win-win situation despite initial assumptions that sellers might be reluctant.

Wrapping It Up

VA home loan process might seem complex, but with the right approach and guidance, it can be your pathway to financial success and homeownership. Remember, each step, from knowing your numbers to strategically managing your finances, builds the foundation for a successful purchase.

Don’t just dream about owning a home. Use your VA benefits wisely to make those dreams a reality. However, it is important to learn how to use VA loan benefits in the best way possible.

Don’t go at it alone! Schedule a consultation with me today, and let’s plan your path to homeownership. Together, we can assess your situation, explore your options, and set a course that aligns with your financial goals.