VA Home Loans
Army Reserve: Drilling
Benefit Fact Sheet
Summary:
The VA Home Loan Program helps Veterans finance the purchase of homes with favorable loan terms and a competitive rate of interest. For VA housing loan purposes, the term "Veteran" includes certain members of the Army National Guard, the Army Reserve, Regular Army, and certain categories of spouses.
Benefit Highlights:
The VA Guaranteed Loan
VA guaranteed loans are made by private lenders to eligible Veterans for the purchase of a home that must be for their own personal occupancy. A Veteran must apply for a loan through a VA-approved lender. If the lender determines that the Veteran meets VA credit and income standards, the loan is approved and VA guarantees a portion of it to the lender. The guaranty protects the lender against loss up to the amount guaranteed and allows a Veteran to obtain favorable financing terms. A Veteran's basic entitlement is $36,000 but additional entitlement is available for certain loans over $144,000. VA does not have a maximum loan amount but lenders will generally only loan up to four times a Veteran's available entitlement without a down-payment, provided the Veteran is income and credit-qualified and the property appraises for the asking price. The maximum entitlement amount changes on an annual basis and is currently $104,250 for 2012. Therefore, if a Veteran qualifies, a loan up to $417,000 ($625,500 in Hawaii, Guam, Alaska, and U.S. Virgin Islands) can be obtained without a down payment.
Features of VA Guaranteed Home Loans
- Equal opportunity for all qualified Veterans to obtain a loan
- No down payment (unless required by the lender or the purchase price is more than the reasonable value of the property)
- Buyer informed of reasonable value of the property
- Negotiable interest rate
- Ability to finance the VA funding fee (plus reduced funding fees with a down payment of at least 5% and exemption for Veterans receiving VA disability 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. VA assistance to Veteran borrowers in default due to temporary financial difficulty.
Obtaining a VA Guaranteed Loan
1. 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.
2. 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.
3. Loan Decision: If the established value is acceptable to all parties and the lender determines that a Veteran is credit and income qualified, the loan may be approved. Most lenders are authorized to make this decision.
4. Loan Closing: Veteran (and spouse) attends the loan closing and signs the note, mortgage, and other related closing documents. The closing agent will explain the loan terms and requirements as well as where and how to make the monthly payments.
Additional Information:
For more information, please visit the VA Home Loans website maintained by the Department of Veterans Affairs at:
http://www.benefits.va.gov/homeloans/
Fact Sheet on VA Guaranteed Loans:
http://www.benefits.va.gov/homeloans/factsheet.asp
Document Review Date: 24 April 2012