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Should You Buy A Home Warranty with a VA Loan?

The logic is tempting to homeowners: buy a home warranty, and repair issues like a broken heat pump or garbage disposal won't come out of your wallet.

While individual appliances may initially be covered under manufacturers’ warranties, these only last a predetermined period of time. Home warranties advertise protection regardless of the age of the appliance or system.

But as consumer experts warn, the reality can be much more complicated.

Is a Home Warranty Required for a VA Loan?

VA loans do not require a home warranty unless you are pursuing a construction loan. The VA requires a one-year builder’s warranty or a 10-year insured protection plan for new construction homes.

How Does a Home Warranty Differ from Homeowners Insurance?

A home warranty is a contract that covers repair or replacement costs for major home systems and appliances due to normal wear and tear. In contrast, homeowners insurance is a policy that safeguards your home and belongings against various perils, including fire, theft, and natural disasters, offering financial protection in case of unforeseen events or damage.

A home warranty is almost always optional with a mortgage purchase, whether VA or any other loan type, while homeowners insurance is often required to close on any type of loan.

Let's see how they compare in terms of coverage:

Claim Home Warranty Homeowners Insurance
Garage Opener Not Working
Tree Falls on the House
Gardener Falls In Yard and Gets Injured
Broken Garbage Disposal
Home Robbery
Circuit Breaker Issues
Pool Filter Breaks
AC Stops Working
Flood Damage

Does Veterans United offer a home warranty?

No, Veterans United does not offer a home warranty. However, if you're looking to protect your home and investments, check out Veterans United Insurance—a homeowners insurance service—to make sure you’re covered. It's a valuable safeguard for your property that can provide peace of mind for unexpected events. Plus, homeowners insurance is required for VA borrowers.

When Choosing a Home Warranty, Read the Fine Print

According to Clark Howard, consumer expert and author of "Clark Howard's Living Large for the Long Haul, if a homeowner needs a minor repair, the warranty company typically charges them a small deductible and covers the repair as promised. But homeowners don't buy warranties for small repairs that they could pay for themselves; they buy warranties for bigger problems, and these repairs may fall into a coverage loophole.

"You have to look at the fine print and find that they may not cover what you might expected them to," said Anthony Giorgianni, an associate editor at Consumer Reports. "There are a lot of exclusions."

"I've just had too many people call and say that companies will stall, that the (repair) people they send will delay and delay," Howard said. "They try and wait you out. Then you go ahead and hire somebody out of your own pocket."

Of course, if the home warranty company doesn't cover a necessary repair, the warranty may not give the new homeowner any more value or peace of mind than if they'd paid for repairs themselves.

How Much Do Home Warranties Cost?

According to a recent Forbes report, home warranties cost an average of $600 per year but can fluctuate wildly depending on location, coverage level, and whether or not they cover specialty items such as an in-ground pool.

Consider an Alternative

Instead of buying a home warranty, Giorgianni recommends setting aside the money so you can self-insure against costly home repairs. "Work towards putting away six months or a year of net salary into an account," he said. "Create a capital fund to repair things or replace them when the time comes."

This approach offers more flexibility than paying premiums to a home warranty company. "If the product doesn't break and if an emergency comes, say you lose your job, you can use that money," Giorgianni said. "That makes a lot better sense than buying all these service contracts to protect you from something that may not happen."

Ultimately, whether or not to get a home warranty should be based on your risk tolerance, budget, and the specific needs of your home. Before making a decision, carefully research different warranty providers, read reviews, and consider the terms and coverage options they offer.

Remember that a home warranty is just one tool in your arsenal for maintaining and protecting your home.

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