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Fact Sheet on VA Home Loans
WHAT IS A VA GUARANTEED LOAN?
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. To get a loan, a veteran must apply to a lender. If the loan is approved, VA will
guarantee a portion of it to the lender. This guaranty protects the lender against loss up to the
amount guaranteed and allows a veteran to obtain favorable financing terms. There is no maximum
VA loan but lenders will generally limit VA loans to $417,000. This is because lenders sell VA
loans in the secondary market, which currently places a $417,000 limit on the loans. For loans
up to this amount, it is usually possible for qualified veterans to obtain no downpayment financing.
A veteran's maximum entitlement is $36,000 (or up to $104,250 for certain loans over $144,000).
Lenders will generally loan up to 4 times a veteran's available entitlement without a downpayment,
provided the veteran is income and credit qualified and the property appraises for the asking
price.
VA LOANS OFFER THE FOLLOWING IMPORTANT FEATURES:
- Equal opportunity for all qualified veterans to obtain a VA loan.
- No downpayment (unless required by the lender or the purchase price is more than the reasonable value of the property).
- Buyer informed of reasonable value.
- Negotiable interest rate.
- Ability to finance the VA funding fee (plus reduced funding fees with a downpayment of at least 5% and exemption for veterans receiving VA compensation).
- Closing costs are comparable with other financing types (and may be lower).
- No mortgage insurance premiums.
- An assumable mortgage.
- Right to prepay without penalty.
- For homes inspected by VA during construction, a warranty from builder and assistance from VA to obtain cooperation of builder.
- VA assistance to veteran borrowers in default due to temporary financial difficulty.
VA DOES NOT DO THE FOLLOWING:
- Guarantee that a home is free of defects. VA guarantees only the loan. It is the veteran's responsibility to assure that he/she is satisfied with the property being purchased. The VA appraisal is not intended to be an "inspection" of the property. A veteran should seek expert advice (a qualified residential inspection service), as necessary, BEFORE legally committing to a purchase agreement.
- If you have a home built, VA cannot compel the builder to correct construction defects although VA does have the authority to suspend a builder from further participation in the home loan program.
- VA cannot guarantee that a veteran is making a good investment.
- VA cannot provide a veteran with legal services.
HOW DOES A VETERAN OBTAIN A VA GUARANTEED LOAN?
- Contract to purchase: Veteran selects home and discusses purchase with seller or selling agent and signs purchase contract conditioned on approval of a VA guaranteed loan.
- Loan application: Veteran selects lender, presents Certificate of Eligibility, and completes loan application. Lender will develop all credit information and request VA to assign a licensed appraiser to determine the reasonable value for the property. Veteran will pay for credit report and appraisal unless the seller agrees to pay. Either VA or the lender will issue a value for property for loan purposes based on the appraisal.
- Loan decision: If the established value is acceptable to all parties and the lender develops that a veteran is credit and income qualified, the loan may be approved. Most lenders are authorized to make this decision.
- Loan closing: Veteran (and spouse) attend the loan closing and sign the note, mortgage, and other related papers. The lender or closing attorney will explain the loan terms and requirements as well as where and how to make the monthly payments. When the loan is reported to VA, the Certificate of Eligibility is annotated to reflect the use of entitlement and returned to the applicant. (The loan closing procedure may vary in some states.)
FREQUENTLY ASKED QUESTION # 29 [ -more VA Loan questions- ]
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Q: VA Foreclosures - Can I use a VA loan to buy a repo house? Does the VA have any such homes?
A: 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. If you are interested in one of these foreclosed single family houses, check the government website http://www.homesales.gov/ to see what might be available in your area. There are many different agencies offering homes on the website. Eligible buyers should contact a broker to have the Offer to Purchase And Contract of Sale VA form completed and submitted. All the routine eligibility and credit terms apply, as with any housing purchase. Check with your lender if you are unsure of the terms and conditions of purchase.
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