Veterans’ Affairs Mortgage Loans

What they are and what it means to you

Veterans’ Affairs (VA) Home Loans are provided by private lenders, such as banks and mortgage companies. The government’s VA department guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.

Eligibility

You must have satisfactory credit, sufficient income and a valid Certificate of Eligibility (COE) to be eligible for a VA-guaranteed home loan. The home must be for your own personal occupancy. The eligibility requirements to obtain a COE are listed below for Service members and Veterans, spouses, and other eligible beneficiaries.

VA home loans can be used to:

  • Buy a home, a condominium unit in a VA-approved project
  • Build a home
  • Simultaneously purchase and improve a home
  • Improve a home by installing energy-related features or making energy efficient improvements
  • Buy a manufactured home and/or lot
  • To refinance an existing VA-guaranteed or direct loan for the purpose of a lower interest rate
  • To refinance an existing mortgage loan or other indebtedness secured by a lien of record on a residence owned and occupied by the veteran as a home

For more information please visit: https://www.benefits.va.gov/homeloans/purchaseco_eligibility.asp

Advantages:

  • Eligible homebuyers are not required to have a down payment in most cases – typically cited as the greatest VA loan benefit. Conventional loans generally require a 5 percent down payment, and FHA loans require 3.5 percent.
  • No monthly mortgage insurance premiums or PMI to pay. FHA loans come with both an upfront and an annual mortgage insurance charge. Conventional buyers typically need to pay for private mortgage insurance unless they’re making a down payment of 20 percent or more.
  • Limitation on buyer’s closing costs. Sellers can pay all of a buyer’s loan-related closing costs and up to 4 percent in concessions.
  • Lower average interest rates than other loan types. VA loans continue to have the lowest average interest rates of all loan types.
  • No prepayment penalties. VA buyers can pay off a loan early without any financial penalties.
  • Two refinance options. The VA loan program allows homeowners with existing VA loans the option to lower their monthly payment with a new interest rate. Eligible homeowners who financed their property with a loan other than a VA loan can refinance into the VA loan program.
  • Second tier entitlement. Even though many veterans have already used their loan benefits, it may be possible for them to buy homes again with VA financing using remaining or restored loan entitlement.
  • An assumable mortgage, typically subject to VA and/or lender approval. You may be able to have someone take over your mortgage payment, which can be a big benefit in an environment of rising interest rates.
  • Foreclosure avoidance advocacy from the VA loan program. The VA has staff members who advocate on behalf of homeowners to find alternatives to foreclosure.

Disadvantages:

  • The VA does not guarantee that the house you buy, whether it is new or previously occupied, will be free of defects.
  • The VA appraisal is not intended to be an “inspection” of the property. If you have any doubts about the condition of the house, it is in your best interest to have a home inspection performed prior to purchasing the home.
  • Most sellers will permit you, at your expense, to arrange for an inspection by a qualified residential inspection service and negotiate with you concerning repairs to be included in the purchase agreement. Such action can prevent later problems, disagreements and disappointments. Remember, the VA guarantees only the loan, not the condition of the property. It is your responsibility to be an informed buyer and assure yourself that what you are buying is satisfactory to you in all respects.
  • The purpose of the VA home loan program is to help those who served finance affordable housing. Despite its Minimum Property Requirements, the VA cannot, however, guarantee that you are making a good investment, or that you can resell the house at the price you paid. The VA does not have the authority to provide you with legal services.

For more information please visit https://www.valoans.com/