Homeownership is part of the American dream that the Armed Services protect. However, achieving that dream is often challenging for Veterans and Service Members who chose to live off-base. This guide is designed to help you understand how VA home loans work. We also explain how other Florida Veteran benefits can help you get ahead as a homeowner.
The truth about VA home loans
People often assume VA loans come directly through the Department of Veterans Affairs. However, that is not the case. Like any other mortgage, a VA home loan is issued by a for-profit lender, such as a bank, credit union or private lending firm.
The different between a VA home loan and a traditional mortgage is that the VA backs a VA home loan. This means there is a guarantee by the VA on a certain percentage of your loan. This reduces the default risk to the lender, which means that they can offer you better rates and terms.
The ability to get a VA loan provides an easier path for Veterans to achieve homeownership. There are also programs available to refinance an existing home. Veterans can apply for traditional home loans, but VA loans are almost always a better deal for the borrower.
Types of VA home loans
- Purchase Loan. VA purchase loans offer the ability to buy a home at a favorable interest rate. In many cases, you can buy with no money down and even avoid the added cost of private mortgage insurance that usually comes with putting less than 20% down.
- Cash Out Refinance Loan. This is basically a VA home equity loan. It allows you to access valuable equity in your home to receive cash you can use for anything from paying off high interest rate credit card debt to home renovations.
- Interest Rate Reduction Refinance Loan (IRRRL): This allows you to refinance an existing VA loan at a lower interest rate. You must already have a VA loan in order to qualify. This is also known as a Streamline Refinance Loan.
- Native American Direct Loan (NADL): This is a specialized type of VA loan available to Native American Veterans. It allows for home purchase, construction or renovation of homes on Federal Trust Land. There is also a refinance option to reduce the interest rate on an existing NADL.
- Adapted Housing Grants: If you have a permanent or total service-connected disability, these grants allow you to purchase, build or modify a home with the appropriate features to accommodate your disability.
- Specialty Adapted Housing (SAH) Grant: This helps disabled Veterans construct adapted homes or remodel existing homes. You can also use the grant money to pay the principal on the mortgage for an adapted home that your purchased outside a VA grant.
- Special Housing Adaptation (SHA) Grant: This allows you to adapt an existing home that a Veteran or family members owns or plans to purchase. You can also purchase a home that’s already adapted.
Eligibility for VA home loans
For the most part eligibility for VA home loans is consistent with eligibility requirements for civilians. Approval is based on:
- Credit worthiness to qualify for the loan
- Verifiable income meet monthly payment obligations
That being said, if you have a lower credit score as a Veteran, you still may be able to qualify for a VA loan at better rates and terms than a civilian would qualify for a regular mortgage because of VA backing.
In addition to these standard eligibility requirements, you must also have a relevant Certificate of Eligibility (COE). For Florida Veterans, the form you need is DD Form 214. You can apply for a COE online through the eBenefits Portal of the VA website or in some cases you can apply through your lender.
In order to use the NADL program as a Native American, your tribal organization must participate in the VA direct loan program in order to qualify for any NADL loan or refinancing options. If you plan to use an IRRRL you must have an existing VA loan. You cannot use IRRRL refinancing for non-VA loans.
And finally, if you use an adapted housing grant you will need to show proof of an eligible permanent disability, such as loss of a limb, severe burns, blindness, or severe respiratory injury.
Florida homeownership benefits for Veterans
Veterans may qualify for the following tax exemptions under Florida law. If you are entitled to an exemption but are unable to file in person, then your next of kin or an authorized financial representative can file on your behalf.
- Basic Veteran disability property tax exemption. If you have a service-connected disability of 10% or greater, you are entitled to a $5,000 deduction in property tax exemption. You must apply through the county tax office where you reside and must provide documentation of the disability.
- Basic Veteran disability property tax exemption for a surviving spouse. If you are a un-remarried surviving spouse of a Veteran who had a service-connected total or permanent disability, then you can qualify for this $5,000 tax exemption as long as you were married five years or more.
- Total real estate tax exemption for total or permanent disability. If you have a total or permanent service-connected disability and you are a permanent resident of Florida they you can claim a full real estate tax exemption. You must have legal title to the property as of January 1 of the tax year in which you make the claim. That means if you buy a property in June, you can be eligible for this exemption the next year.
- Total real estate tax exemption for surviving spouse. If your spouse died of a service-connected caused while on active duty, you can qualify for this full exemption as long as the Service Member was a permanent resident of Florida on January 1 of the year they passed. Additionally, you can qualify for this exemption if you hold the beneficial title to the property until you remarry or sell the property.
- Senior ad valorem tax exemption. If you’re a partially disabled Veteran age 65 or over and any portion of your disability was combat-related, then you can qualify for a discount on the ad valorem tax of your homestead. You must be honorably discharged and this exemption does not pass on to surviving spouses.
- Real estate tax exemption for the wheelchair-bound. Quadriplegic Veterans who are residents of Florida qualify for full tax exemption on any real estate they own or use. Veterans who are paraplegic, hemiplegic or permanently wheelchair-bound may be tax exempt from real estate.
- Real estate tax exemption for the blind. If you are a blind Veteran, you qualify for full real estate tax exemption as well, as long as you’re a Florida resident.