The Truth About Disability Benefits for VA Loans

US Military

Qualifying for a VA loan is separate from a veteran’s disability rating. But, there are certain disability benefits veterans may receive.

The first step is qualifying for the loan. You must prove you meet the credit score, debt ratio, and residual income requirements. Disabled or not, if you can’t afford the loan, no lender can give it to you.

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Once you qualify for the VA loan, though, you may be eligible to receive several benefits.

Your Disability Rating Can’t Prevent Loan Approval

First, know that your disability rating won’t affect your ability to secure financing. You can use your disability income to qualify for the loan. Just like a borrower with standard income, you must prove you have enough income to cover your bills. This includes the new potential mortgage along with your current bills and the cost of living.

Qualifying for the VA Loan

Qualifying for a VA loan as a disabled veteran works much the same way as any other borrower. You apply for the loan and disclose your income, assets, and debts. The lender verifies these items and asks for further clarification.

You’ll need a credit score of at least 620. You’ll also need a debt ratio less than 43%. Lastly, you’ll have to satisfy the residual income requirements for your area. The VA sets these standards based on the cost of living in your area. The amount you must have on hand each month depends on your family size.

The VA is fairly flexible when it comes to qualifying for the VA loan for any borrower.

VA Fee Exemption

If you have your disability rating before you close on your VA loan, you may be exempt from the VA funding fee. This can save you as much as 2.15% of your loan amount if this is your first use of your VA benefits. On a $200,000 loan, you could save $4,300. If you’ve used your VA benefit before, you may even save more money as the funding fee increases with each use.

If you don’t have your VA disability rating prior to closing on your loan, you may be eligible for a refund. In order to be eligible, your disability rating date must be prior to the date of your closing. If you wrapped the fee into your loan, you can use the refund to pay down the loan’s principal.

Grants as Disability Benefits

In addition to the funding fee exemption, you may be eligible for a grant as a part of your disability benefits. Two grants help disabled veterans make their home accessible. It doesn’t do veterans any good to buy a home if they can’t get around it.

The grats can help you pay as much as 50% of the cost of making your home accessible. The maximum amount given equals $77,307 in a lifetime. However, the VA does allow borrowers to access the grant up to three times, but they can’t exceed the aggregate total.

The two grants available are as follows:

  • SAH – The Specially Adapted Housing Grant provides veterans with money to build an accessible home or remodel an existing home.
  • SHA – The Special Housing Adaption Grant provides funds to adapt an already owned home. The veteran or a family member must own the home. It also provides help to purchase an already accessible home for the veteran.

The Specially Adapted Housing Grant has some strict qualifying requirements. For example, veterans must meet one of the following:

  • Loss of use of one or both lower extremities
  • Loss of one or both lower extremities
  • Blind in both eyes plus the inability to use one leg
  • The inability to use one leg plus other injuries or illnesses
  • The inability to use one leg and one arm
  • Extreme burns

The Special Housing Adaptation Grant requires any of the following for qualification:

  • Loss of vision in both eyes
  • In ability to use both hands (or loss of both hands)
  • Severe burns
  • Respiratory injuries

In any case, the home being renovated must be the veteran’s primary home.

The disability benefits for veterans extend far beyond just their standard pay. If you were injured during the line of duty, apply for your disability rating. Your local VA center can then help you understand all of the benefits available to you. Not only can you secure a mortgage with no down payment, you may have other financial rewards waiting to help make life as easy as possible for you.

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