VA Home Loan Program

Oct 5, 2012 by

Department of Veterans Affairs Logo An estimated 22 million Americans are eligible for loans through the Department of Veterans Affairs’ Guaranty Loan Service. If you’re one, there’s no better way to get a mortgage.

VA Home Loan Program Basics

The Department of Veterans Affairs does not directly lend mortgage money to veterans. Instead, borrowers work with private lenders, but the VA eases qualification by guaranteeing some or all of the loan.

So far in 2012 the VA has guaranteed over half a million loans—up 30 percent from 2011 and triple the number of VA loans in 2008.

 Eligibility for VA Home Loan Program

These categories of Americans may benefit from the VA Home Loan Program:

  • Veterans
  • Active duty personnel
  • Certain reservists and National Guard members
  • Surviving spouses of persons who die on active duty or die as a result of service-connected disabilities
  • Certain spouses of active duty personnel who are (a) missing in action, (b) captured in line of duty by a hostile force, or (c) forcibly detained by a foreign government or power

To prove to a lender that you’re eligible for the VA Home Loan Program, you need to get a Certificate of Eligibility (COE). The process for obtaining a COE varies depending on the category above in which you fit. Check out the details from the Department of Veteran Affair’s website.

You May Save Thousands Through the VA Home Loan Program

These are very significant benefits, so listen up veterans! From the VA’s website:

  • You can buy a home without a down payment – as long as the sales price doesn’t exceed the appraised value. (Of course, you have to qualify in terms of income and credit.)
  • You won’t need to buy private mortgage insurance.
  • VA rules limit the amount you can be charged for closing costs.
  • The seller may pay closing costs. (You should keep this in mind when negotiating the sales price.)
  • The lender can’t charge you a penalty fee if you pay the loan off early.
  • VA may be able to provide you some assistance if you run into difficulty making payments.

You should also know that

  • You don’t have to be a first-time homebuyer.
  • You can reuse the benefit.
  • VA-backed loans are assumable, as long as the person assuming the loan qualifies.

How Much Can You Borrow?

The most you can borrow is the lender’s decision; the VA doesn’t specify a maximum loan size. However, there is a maximum dollar amount that the Department can guarantee. Your lender may be willing to lend you more than the amount guaranteed, but may require a down payment to do so.

What Does Participation in the VA Home Loan Program Cost You?

Though the VA doesn’t require private mortgage insurance, it does charge a one-time “funding fee” of 2.15% of the amount guaranteed. That’s $2,150 for every $100,000 guaranteed. The funding fee can be rolled into the loan and financed.

Ready to Apply?

The steps to getting a VA Home Loan are a bit tedious, but the benefits are very well worth it. Visit the “Steps in Getting a VA Loan” page of the VA’s website to learn more.

Is This a Great Deal or What?

Anybody out there have a VA loan? Was the red tape involved manageable? How much money do you figure you’re saving? Do you agree VA loans offer amazing benefits?

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  • We just refied into a VA loan this past June. I should have just went with a VA loan in the first place. While VA loans are awesome, they do come with higher closing costs. The loans are assumable but that also has to be approved by your lender. Even with a little extra red-tape you have to go through I think it’s worth it. We ended up getting rid of the pointless PMI and dropped our interest rate by 2% for a total savings of $336/month. I would definitely use them again, but I don’t plan on taking on another mortgage after this one is paid off.

    • Thanks very much for that firsthand account. $336/month–what a savings!

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