VA
guaranteed loans are guaranteed -not issued, by the U.S. Department of
Veteran Affairs (VA) to eligible veterans for the purchase of a home. The
guaranty means the lender is protected against loss if you fail to repay the
loan. In most cases, no down payment is required on a VA guaranteed loan and the
borrower usually receives a
lower interest rate than is ordinarily available with other loans.
Key Benefits:
Negotiable
interest rates.
Closing
costs are comparable and sometimes lower - than other financing types.
No
private mortgage insurance requirement.
Right
to prepay loan without penalties
The
Mortgage can be taken over (or assumed) by the buyer when a home is sold.
Counseling
and assistance available to veteran borrowers having financial difficulty or
facing default on their loan.
Although
mortgage insurance is not required, the VA charges a funding fee to issue
a guarantee to a lender against borrower default on a mortgage. The fee may be
paid in cash by the buyer or seller, or it may be financed in the loan amount.
A
VA loan can be used to buy a home, build a home and even improve a home with
energy-saving features such as solar or heating/cooling systems, water heaters,
insulation, weather-stripping/caulking, storm windows/doors or other energy
efficient improvements approved by the lender and VA.
Veterans
can apply for a VA loan with any mortgage lender that participates in the VA
home loan program. A Certificate of Eligibility from the VA must be presented to
the lender to qualify for the loan.
Steps
to a VA Loan
Apply
for a Certificate of EligibilityA veteran who doesn't have a certificate can
obtain one easily by completing VA
Form 26-1880, Request for a Certificate of Eligibility for VA Home Loan
Benefits and submitting it to one of the Eligibility
Centers with copies of your most recent discharge or separation papers
covering active military duty since September 16, 1940, which show active
duty dates and type of discharge.
Decide
on a home to buy and sign a purchase agreement
Order
an appraisal from VA. (Usually this is done by the lender.)
Most VA regional offices offer a "speed up" telephone appraisal
system. Call the local VA office for details.
Apply
for a VA loan.
While the appraisal is being done, the lender (mortgage company, savings and
loan, bank, etc.) can be gathering credit and income information. If the
lender is authorized by VA to do automatic processing, upon receipt of the
VA or LAPP appraised value determination, the loan can be approved and
closed without waiting for VA's review of the credit application. For loans
that must first be approved by VA, the lender will send the application to
the local VA office, which will notify the lender of its decision.
