What is an VA Loan?
The VA Loan became known in 1944 through the original Servicemen’s Readjustment Act also known as the GI Bill of Rights. The GI Bill was signed into law by President Franklin D. Roosevelt and provided veterans with a federally guaranteed home with no down payment. This feature was designed to provide housing and assistance for veterans and their families, and the dream of home ownership became a reality for millions of veterans. The GI Bill contributed more than any other program in history to the welfare of veterans and their families, and to the growth of the nation’s economy.
With more than 25.5 million veterans and service personnel eligible for VA financing, this loan is attractive and has many advantages. Eligibility for the VA loan is defined as Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continuous days during peacetime. There is a two-year requirement if the veteran enlisted and began service after September 7, 1980 or was an officer and began service after October 16, 1981. There is a six-year requirement for National guards and reservists with certain criteria and there are specific rules concerning the eligibility of surviving spouses.
VA will guarantee a maximum of 25 percent of a home loan amount up to $104,250, which limits the maximum loan amount to $417,000. Generally, the reasonable value of the property or the purchase price, whichever is less, plus the funding fee may be borrowed. All veterans must qualify, for they are not automatically eligible for the program.
VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home, which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fails to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms.
VA Loan Tips
- Entitlement to a VA Home Loan Some first-time homebuyers are misinformed as to the workings of a VA Loan. The Veterans Administration does not normally act as a lending agent. Instead, the VA is in the business of guaranteeing the loans of veteran.
- Advantages to the VA Guaranteed Loan If you are looking to purchase a home with no money down, you’re in luck if you qualify. VA mortgage loans can be guaranteed with no money down.
- About VA Loans with Adjustable Rates Veterans who shop around will learn it’s possible to get a fixed rate loan, negotiated with the lender of your choice. Another option? The adjustable rate loan.
- Getting Pre-approved for Your VA Loan Obtaining pre-approval for your VA loan amount is an excellent time-saving step. Once you know the exact amount you’re eligible for in your VA home loan, you can begin.
- Eligibility for a VA Home Loan Guaranty It’s easy to use an online program called ACE–the Automated Certificate of Eligibility–to get started in the VA loan guaranty process.
- Your Discharge May Affect Your Chances The nature of your discharge can affect your eligibility for a VA loan. The certificate of eligibility process gets complicated for veterans separated from the military with a discharge other than honorable.
- I Lost My DD214 Those who have been discharged, separated or retired should keep multiple copies of the DD214–your discharge paperwork. It’s the most important military document in your records.
- For Those Who Already Have a VA Loan Check with your lender about interest-rate reduction refinancing on your existing VA loan. This is a great advantage and there’s no need to re-establish VA loan eligibility.
- Renewable VA Certificate of Eligibility A VA certificate of eligibility is renewable on a one-time basis. You qualify if the existing VA loan is paid in full, but you still own the property.
- VA Loan Partial Eligibility If you have an existing VA loan, you may still be able to get VA loan eligibility for second loan. A VA certificate of eligibility may be available for any unused amount of what you are entitled to receive.
- VA Loans and Rental Properties The idea of buying a building intended as a rental property is sound–but VA mortgages aren’t intended for this purpose.
- VA Loans and Your Debt Ratio To qualify for a VA home loan, you must fall into a certain debt ratio. Your income, credit card debts and the new indebtedness created by the VA mortgage are all tallied up to see where you land in terms of debt.
- Uses for Your VA Loan A VA home loan has more flexibility than you might think. While many use this benefit to purchase existing homes, there are many other applications.
- About the VA Funding Fee There is a “VA funding fee” required by law. A first-time buyer will pay a little over two percent for a ‘no money down’ loan, and a second time buyer’s fee is just above three percent.
- Co-signers on VA Loans It’s true that the legally married spouse of a military member or veteran can co-sign a VA loan. There is no “penalty” for doing so, the veteran loan is still fully guaranteed by the VA.
- The Veterans Benefits Act of 2004 The Veterans Benefits Act of 2004 made many changes to the VA loan process. If you haven’t had to get eligibility or otherwise deal with the VA for a loan since the act passed, you may be surprised at the changes.
- VA Home Loans and Fair Housing Laws Federal law requires lenders who participate in VA home loans to obey Fair Housing Laws. The law prohibits a great many things including refusal to negotiate.
- VA Pre-approved but Can’t Find a House Those with VA loan eligibility or pre-approval may, depending on the location, have trouble finding new homes for sale. Fortunately, there are alternatives.
- VA Loan Foreclosures It’s true, the VA does get control of properties with VA loan foreclosures. VA foreclosures are offered to the public in the same manner as repossessed HUD and USDA Development homes.
- Improving Credit to Enhance VA Loan Eligibility Because your VA loan eligibility depends on your debt ratio, it’s a good idea to start thinking about fixing your credit long before actually filling out loan paperwork.
- Help for VA Homebuyers When applying for a VA home loan there are some advantages to having the VA on your side during the home buying process.
- VA Loans to Purchase Farms A veteran generally cannot get a VA loan to purchase a farm with one notable exception. If the farm has a residence where the veteran intends to live.
- VA Loans for Properties Outside of the US The VA does not allow veteran mortgages for properties outside the United States. The VA does allow purchases in “American territories and possessions”.
- VA Home Loans After a Borrower’s Death Unless mortgage life insurance is purchased, the responsibility of a veteran mortgage passes to the spouse or the veteran’s estate in the event of his or her death.
- Selling a VA Loan Property Some people may assume that selling the property purchased with a VA loan releases them from obligation to the VA loan. This is not automatic!
- VA Mortgage Payments Chances are you will make payments to different lenders over the course of your VA mortgage. Selling mortgages from lender to lender is common.