VA Loans

VA loans are guaranteed loans that are made by private lenders to eligible veterans to purchase a home for their own occupancy. The veteran must apply to a lender and if the loan is approved, the VA will guarantee a portion of the loan to the lender. This protects the lender against the loss of up to the amount guaranteed and will allow a veteran to obtain better financing options from the bank.

There are no maximums set on VA loans, but lenders will typically limit veterans to $417,000. This is due to the fact that many lenders will sell their VA loans in the secondary market and there is a $417,000 limit on those loans. For the loans up to that amount, there is a possibility that qualified veterans will not require a veteran to make a down payment. Lenders will also generally loan up to four times a veteran's available entitlement without a down payment.

VA loans offer many important features that aid veterans in the home buying process. All qualified veterans are able to obtain VA loans. There are no down payment required unless the lender or if the purchase price is more than the reasonable value of the property. The buyer is also informed of the reasonable value of the property. VA loans are also able to offer the veteran the ability to negotiate interest rates and the ability to finance the VA funding fee. If the veteran does pay a down payment they are able to reduce funding fees down to at least 50% and exemption for veterans receiving VA compensation. The closing costs are also comparable with other financing types. There are no mortgage insurance premiums or assumable mortgages. The veteran also has the right to prepay without a penalty. There is also VA assistance available to those veterans that are in default due to temporary financial difficult.

VA loans do not guarantee that a home is free of defects. The VA only guarantees the loan and it is the responsibility of the veteran to assure that he or she is satisfied with the condition of the property being purchased. The VA appraisal is also not intended to be an inspection of the property. A veteran should seek expert advice as necessary before they commit to purchasing the house. If the veteran chooses to have a home built, they are responsible for having any construction correction that is required in the home. The VA is not able to guarantee that the veteran is making a good investment and they cannot provide legal services to the veteran.

If a veteran has previously suffered foreclosure or has given a deed in lieu of foreclosure with the last two years of their credit history, they are not generally eligible for a VA insured mortgage. If they have had a foreclosure on a VA loan then the applicant may not be able to receive full entitlement for a new loan. If a veteran has filed bankruptcy, the VA guidelines require that a minimum of two years have passed since the discharge date of the borrower on Chapter 7 bankruptcy. The veteran is required to submit a full explanation of the bankruptcy and they must have re-established good credit. If a veteran has filed Chapter 13 then the payments to the court must be made on a regular basis for one year and the court trustee will require written approval to proceed.