Congress created the VA Loan Guaranty Program in 1944 to help returning service members achieve the dream of homeownership. Since then, the Department of Veterans Affairs has helped more than 18 million military members purchase homes.
A VA loan is perhaps the most powerful and flexible lending option on the market today. Rather than issue loans, the VA instead pledges to repay about a quarter of every loan it guarantees in the unlikely event the borrower defaults.
That guarantee gives VA-approved lenders greater protection when lending to military borrowers and often leads to highly competitive rates and terms for qualified veterans.
Far and away, the most significant benefit of a VA loan is the borrower’s ability to purchase with no money down.
VA loans also come with less stringent underwriting standards and requirements than conventional loans. In fact, about 80 percent of VA borrowers could not have qualified for a conventional loan. These loans also come with no private mortgage insurance (PMI), a monthly expense that conventional borrowers are required to pay unless they put down at least 20 percent of the loan amount.
Despite the broad eligibility requirements, fewer than 10 percent of the nation’s nearly 25 million veterans have taken advantage of the home loan benefits earned by their service. Some veterans believe they’re ineligible, while others are unsure of how to take action. A VA survey conducted in 2004 found that 20 percent of veterans were completely unaware of the VA Loan Guaranty Program and what it could mean for their families.
Across the country, millions of veterans and active-duty service members are eligible to participate in the VA Loan Guaranty Program. Those who fit into one or more of these categories may be eligible:
Veterans and active-duty service members have to obtain a Certificate of Eligibility from the VA. This is a formal document that basically certifies that the prospective borrower has a VA entitlement and is eligible to participate in the program. An entitlement is the amount of money the Veterans Administration will guarantee on a loan.
Veterans can download a Request for Certificate of Eligibility online. VA-approved lenders will also help veterans obtain and fill out these forms automatically and electronically.
It’s important to remember that not everyone who is eligible for a VA loan will ultimately obtain one.
VA loans are primarily used for buying or building single-family homes. But these flexible loans can also help veterans improve their current living conditions or save more money each month through refinancing. Veterans can use a VA loan to:
But veterans and active-duty service members cannot use a VA loan to purchase aninvestment property. These are geared toward helping eligible veterans become homeowners, not landlords or entrepreneurs.
Contrary to popular belief, there isn’t an actual maximum cap on VA loan amounts. The maximum VA loan amount will depend on a host of factors. Generally, VA-approved lenders will adhere to limits and guidelines established by the federal mortgage agencies,Fannie Mae and Freddie Mac. Throughout most of the country, qualified borrowers can obtain a loan worth up to $417,000 without putting down any money.
That limit is higher in some of the nation’s more expensive counties, where loan limits can rise to $625,000 and beyond.
VA loans allow most qualified veterans to purchase without putting down a single dollar toward a down payment or closing costs. The VA caps fees and costs that veterans can pay, although there are a few things, like appraisals, that veterans often have to cover out of their own pockets.
Regular Military
Reserves and National Guard
For cash-out refinance loans, the funding fee is 2.15 percent for regular military and 2.4 percent for Reserves and National Guard.
While veterans have to pay the VA Funding Fee, they can have it rolled into the cost of the loan.
VA loans have made a difference in the lives of millions of veterans. They allow eligible veterans and active-duty service members with lower incomes and less-than-perfect credit to become responsible homeowners. But they may not be for every veteran.
Those who come to the table with greater liquidity and cash reserves may find a better interest rate with a conventional loan.
But that is certainly not the vast majority of VA borrowers. VA loans can also be a turnoff to some sellers, who might need to pay an additional closing cost fee or make an extra repair.
VA loans also have some institutional stereotypes as being slow and difficult to process. The agency is much more streamlined and efficient today than it was in years past. In most cases, a VA loan is going to be the best fit for an eligible veteran, service member or spouse.
No other lending product can match the benefits and buying power.
6501 W. Archer Ave, Chicago, IL 60638
(773) 306-0705
info@prlginc.com
Prime Rate Lending Group, Inc. NMLS ID: 1341261
IL License #: MB.6761105
Jessie Calderon - Operations Manager NMLS ID: 287419