Veterans Qualify For VA Loans

VA Loans
Finance

¡¡¡¡Banks and other private mortgage companies make a special type of home loan a portion of which is guaranteed by the Veterans Administration (VA) to veterans of the US Armed Services. This guarantee protects the lender's investment should the borrower default.

Contact the VA to Determine if You are Eligible for a Loan

There are various qualifications to be deemed eligible for this benefit by the VA. Wartime veterans who served at least 90 days and were not dishonorably discharged qualify. Peacetime service veterans need to have served at least 181 days if they served prior to Sept 7, 1980 or at least two years after that date and were honorably discharged. Those serving in the Reserves and National Guard for at least six years and are still serving or have been honorably discharged may also be eligible. Surviving spouses of eligible persons who died as the result of service or service-related injuries who have not remarried may also be eligible. (Contact your local VA office for other questions regarding eligibility.)

Get a Certificate of Eligibility from the VA before Applying for a Loan

In order to apply for a VA loan you must have a Certificate of Eligibility from the Veterans Administration. To get this, go the VA website and get: VA Form 26-1880. Fill it out and send it in or along with your DD Form 214 documenting your service, if you served after 1979. This certificate does not guarantee the bank will approve your credit application, you must still qualify financially. Some veterans will be able to get an Automatic Certificate of Eligibility (ACE) through their lender via the internet, if the VA has entered sufficient information about the veteran in their database.

Restrictions on VA Loans

A VA home loan must be used to finance your personal residence within the United States or its territories. They can also be applied to home refinances as well as certain types of home improvements.

There is a Funding Fee

A fee of two percent of the loan amount or 2.75 percent for reservists must be paid when you close your VA. This can be included in the loan. If you can make a down payment of at least five percent, this fee will be reduced.

Advantages of VA Loans

Typically, veterans can get 100% financing with no down payment required. VA loans are guaranteed so there is no Private Mortgage Insurance (PMI) required which can be a savings of over $50 per month. Also, there are no penalties if you prepay the loan. Competitive interest rates are available. Finally, loan qualification may be slightly easier than if you were applying for a conventional loan. Sellers may be required to pay all closing costs. Nearly every lender offering FHA loans also makes VA loans.

Disadvantages of VA Loans

Sellers may be hesitant to work with someone who is acquiring a VA loan as they used to take longer to process than traditional loans. However, getting a VA loan today takes only a little longer than a conventional loans. Sellers are often asked to pay a portion of closing costs, so be aware of that when negotiating the sales price of the home. The guaranteed maximum may make this not feasible in some markets.

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