How Veterans Administration Loans (VA Loans) Work

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The United States Department of Veterans Affairs provides a loan guarantee service to honorably discharged veterans of the United States military. Essentially, any serviceman or their surviving spouse is eligible for 100% financing without a down payment or mortgage insurance or 90% refinancing on an existing home.

How exactly does a VA loan work?

The VA loan isn’t issued by Veterans Affairs. Instead, the loans are issued by private lenders like banks and mortgage companies, but insured by VA. This means that if you default on your loan, Veterans Affairs will guarantee or secure it. This often translates to lower down payment requirements and eligible interest rates.

What else does the VA loan program do?

The Veterans Affairs loan program also provides pre-purchase counseling. VA officers will sit down with you and your families and go through the process of purchasing and owning a home, obtaining financing and basically understanding the home ownership process.

Does entitlement to a VA loan guarantee a mortgage?

Unfortunately, no it doesn’t. Veterans Affairs can’t force a lender to issue you a home loan, but it can help to make you a more attractive recipient. You still must meet basic credit and income requirements. But if a lender is concerned, for example, about a veteran’s poor credit history, the loan can still be denied or offered at a higher interest rate.

How much are veterans entitled to under the VA loans program?

The bare-bones, basic entitlement is $36,000, but this varies depending on region, median home prices and the amount required. While the amount changes yearly, the limit for the continental U.S. in 2008 was $417,000. Consequently, a qualified veteran could obtain a no down-payment mortgage for an amount up to $417,000.

What do I need to get a VA loan?

You need a Certificate of Eligibility. You can get one either from your lender or the Department of Veterans Affairs. Most recent veterans’ information is stored in an online database known as ACE (Automated Certificate of Eligibility), so lenders can access this database to find out if a borrower has a certificate. eBenefits.Va.Gov

How do I get a VA loan?

First you need to select a home and sign a purchase contract that’s dependent on you receiving a VA home loan. Next, you should choose a lender and complete a loan application with your Certificate of Eligibility. The lender will then contact Veterans Affairs to assign an appraiser to determine the market value of the home. eBenefits.Va.Gov

Once a Certificate of Reasonable Value has been issued on the home, your lender will let you know that you’ve been approved for your loan. At that time, you’ll attend the closing where the lender or its attorney will explain the terms of the loan to you, and you will sign the loan agreement.

After the signing, the loan is sent to Veterans Affairs for guaranty, at which point your Certificate of Entitlement is annotated and sent back to you. Finally, once all appropriate approval has taken place and paperwork is signed, you move in.

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Veterans Home Loans Benefits for Veterans and Their Surviving Spouses

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It is every person’s dream to build a home of his own. However, it is a hard fact that traditional lenders are placing a high premium on their interest rates if you acquire funding assistance from them. The good news is that veterans of war, their surviving spouses and those who have been a part of the military service can avail of the Veterans Affairs home loans. This is a very good program offered by the federal government and you can use it to refinance your existing amortization, avail of a new home loan or to upgrade your home to make it energy efficient. Below are the benefits that you can acquire with this VA loan program.

Fast and Easy Application Process

This is considered as one of the most advantageous aspects of the Veterans Administration home loan. You will just need to show proof that you are eligible to avail of the VA loan and you will be accommodated immediately. In addition, if you are a veteran or a member of the military service, obtaining the eligibility document is immediate and you can do this online. If you are a national guard, a reserve or a surviving spouse, you will need to request for it, but the process is undeniably simple as well. Make sure to accurately fill out the form so that the lenders and the Veteran Affairs can easily offer you with the most suitable home loan policies. eBenefits.Va.Gov

Cost-Efficient Home Loan Offers

You can definitely get great value for your money when you avail of the VA home loan. Apart from the fast and easy VA home loan process, there are certain aspects which allow you to save a low on your mortgages. For one, there are zero down payments when you purchase a property. In addition, you will be excluded from prime mortgage insurance payments. The closing prices as well as the origination prices will be regulated by the federal government so you can acquire lesser price for your overall purchase. You can also refinance your mortgages and acquired reduced interest rates. You can also borrow up to 103.15% of the property value for new properties and up to 90% of funding for home improvements. Unlike conventional lending, you won’t be obliged to pay for early payment of your amortization. eBenefits.Va.Gov

Expert Assistance

VA also offers expert and relevant assistance for your VA loans for home. An inspector will ensure that the property that you plan on purchasing is a good one. You are also allowed to sell your property to a veteran who will assume the mortgage. Overall, you will be guaranteed by the federal government for your home loan so that it will be easier for you to approach lenders without being required to submit bulks of documents which is usually needed in conventional lending procedures.

Virendra Smith is expert financial adviser rendering us VA home loan process guidelines for veteran and their surviving spouse in USA.