A VA loan is the only loan program that still allows the borrower to finance 100% of the home's value and purchase with $0 down. Now more than ever banks are requiring large down payments for conventional loans. In many cases they require 10-20% down, putting home ownership out of reach for many prospective buyers.
A VA loan offers two benefits that will substantially lower your monthly payment. PMI, or private mortgage insurance, is not required on a VA loan. PMI is an added monthly expense required for conventional loans where the borrower finances more than 80% of the home's value.
Interest rates are also lower with a VA loan.
The qualification guidelines are less stringent for VA loans. Because the loan is backed by the government, banks have relaxed the often strict lending rules for VA loan applicants, making them easier to obtain.
Q: What is a VA guaranteed home loan?
A: VA guaranteed loans are made by private lenders, such as banks, savings and 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 fail to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financial terms.
Q: How do I get a Certificate of Eligibility?
A: It may be possible to obtain a Certificate of Eligibility from your lender. Most lenders have access to the Web LGY system. The internet-based application can establish eligibility and issue an online Certificate of Eligibility in a matter of seconds. Not all cases can be processed through Web LGYonly those for which VA has sufficient data in their records. However, veterans are encouraged to ask their lenders about this method of obtaining a certificate.
Q: How do I obtain a VA home loan?
A: Here are the steps:
Select a lender, present them with your Certificate of Eligibility if available, and complete a loan application. The lender can also obtain a Certificate of Eligibility on your behalf.
The lender will develop all credit and income information. They will also request to assign a licensed appraiser to determine the reasonable value for the property. A Certificate of Eligibility will be issued.
The lender will let you know the decision on the loan. You should be approved if the established value and your credit and income are acceptable.
Select a home and discuss the purchase with the seller or selling agent. Sign a purchase contract conditioned on approval of your VA home loan.
You (and spouse) attend the loan closing. The lender and closing attorney will explain the loan terms and requirements as well as where and how to make the monthly payments. Sign the note, mortgage, and other related papers.
Q: What are the benefits of a VA home loan?
A: There are many benefits to a VA home loan:
No mortgage insurance premiums.
An assumable mortgage.
Right to prepay without penalty.
VA assistance to veteran borrowers in default due to temporary financial difficulty.
Q: Can I get a VA loan if I have had a bankruptcy in the last few years?
A: The fact you and/or spouse have been adjudicated bankrupt does not in itself disqualify you for a VA home loan. The following rule applies: if the bankruptcy was discharged more than two years ago, it MAY be disregarded.
Q: Why do I have to pay a fee for a VA home loan? Since I paid a fee for my first loan, why is there a larger fee for my second loan?
A: The VA finding fee is required by law. The fee is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce cost to the taxpayer.
Q: I want to buy a house with a VA loan. Do I need to occupy the property?
A: The law requires that you certify that you intend to occupy the property as your home. This requirement is considered satisfied if you actually intend to occupy the property as your home and if fact you so occupy it when the loan is closed or within a reasonable time afterward.