Is a VA Loan Best For You?

The VA loan program was first introduced after World War II. This special program was created in order to assist veterans in obtaining financing for the purchase of a home. The VA home loan program provides veterans with more opportunity to own their own homes. The VA does not issue mortgages or lend money. Instead, the VA guarantees mortgages, therefore protecting the lending institution against loss incurred if the borrower of the loan defaults. It is because of this guarantee that VA loans can be easier to obtain. There are several reasons why VA home loans are a terrific program.

Advantage 1 - No Down Payment

One of the first reasons is that a down payment is not required for VA loans. This is great for a veteran who wants to purchase a home, but does not have the cash on hand to make a down payment. A veteran does not have to worry about making a large down payment, but if he or she prefers, a small down payment can be made. By making a down payment of five percent or more, a veteran lowers the amount of the basic funding fee that is charged.

Advantage 2 - No PMI Insurance

A second advantage to VA mortgage loans is that there is not a requirement for private mortgage insurance. Generally speaking, if a veteran pays less than 20% down on a conventional home loan, he or she will have to pay private mortgage insurance until there is 20% equity in the home. On a VA loan, private mortgage insurance is not required. This is one of the reasons why a VA home loan may be preferred over a conventional home loan.

Advantage 3- Competitive Interest Rates

A third advantage to obtaining a VA loan is that VA loans offer competitive interest rates. This is one of the best advantages to a VA loan. Many lending institutions offer low or no-down payment loans with higher interest rates. Since a VA loan can be obtained with no or little money down at a competitive interest rate, these loans offer great financial incentives for a veteran looking to borrow.

Advantage 4 - VA Home Loan Refinance

A fourth advantage to VA loans is the fact that a veteran can obtain a VA home loan refinance. This is where a veteran pays off the original VA loan with a new VA loan. The borrower can potentially take cash out from the equity in the home to pay off debts, make home improvements, or accomplish other goals. In addition, a VA loan can also be refinanced with the VA Streamline Program, allowing the veteran to capture a lower market interest rate without another appraisal or credit and income qualifying. Not only can a veteran benefit once from receiving a VA loan, but again and again with ongoing programs.

As you can see, the VA loan, exclusively developed to provide housing and assistance for veterans and their families, has many advantages over conventional loans. Home buying also requires diligent planning that is possible only if you know the various factors involved and how they affect your buying decision. Here are a few answers to some of the most common questions that may crop up in your mind regarding VA loans.

What is the Certificate of Eligibility?

The Certificate of Eligibility, also known as the COE, is provided by the VA to prove to your VA lender that you are eligible for a VA loan. In order to receive your COE you must complete a the VA Form 26-1880, Request for Certificate of Eligibility for Home Loan Benefits, to the Winston-Salem Eligibility Center, along with the appropriate proof of military service.

Most lenders can assist you in getting your COE through the Automated Certificate of Eligibility System, commonly known as ACE. With the ACE internet application eligibility can be established and an online COE can be issued.

What Factors Affect VA Interest Rates?

Interest rates of VA home loans depend on various factors that may include employment status, credit history, and loan program. Interest rates are determined on the basis of the 30-year mortgage bond and other market factors and are therefore quite volatile. As such, rates can change everyday or even twice in a day, so you need to consult a good financial advisor or a VA loan expert to decide the right time to apply for a home loan.

Why should Veterans Choose VA Home Loans?

The VA Loan programs are specially designed to provide aid to active duty and retired military personnel; If you are a qualified veteran, you are entitled to the special benefits. Unlike other conventional loans, VA home loans provide you 100% financing at competitive rates. This type of mortgage protects you from predatory lending by limiting the types of fees that can be charged. In addition, you have the option of choosing a VA streamline refinance if interest rates reduce using VA Home Loan Refinance programs. Finally, the VA is generally satisfied with a clear twelve month credit history and is not as strict regarding credit issues as lenders are with conventional loans.

Every time you obtain a VA home loan, you are required to pay a VA funding fee that goes to the Veterans Administration and is included in your loan amount. The funding fee is 2.15% of the loan amount when you get a VA loan for the first time, however for each subsequent use, the fees will be 3.3% (or only 1.5% if you can put down 5% as down payment). The fees may be waived in cases where veterans have a 10% or greater service related disability.

Can I Reuse My VA Eligibility?

Yes, if you have paid off your previous VA home loan and no longer own the property, your eligibility is reusable. You may also have your eligibility restored, one-time only, if your VA loan has been paid off, but you still own the property. To restore your eligibility you must send the VA a completed Form 26-1880 and include proof that your previous loan has been paid off or that you no longer own the property.

Can I Get a VA Loan if I Have a Bankruptcy?

Yes, veterans that have filed for bankruptcy can still get approval for VA home loans. However, the requirements to obtain a loan depend on the type of bankruptcy filed.

If you filed for a Chapter 13 bankruptcy you may still receive approval even if you are still paying on your bankruptcy. You must have made all of your payments on time for a year, provide a complete explanation of the bankruptcy, establish good credit, prove job stability, and receive written approval from the court trustee.

If you filed for a Chapter 7 bankruptcy you must wait at least two years after the discharge date, re-establish good credit, prove job stability, and provide a complete explanation of the bankruptcy prior to qualifying for a VA loan.

The above frequently asked questions probably address just a few of the questions you may have regarding VA home loans. For more information and answers to your questions please visit the Department of Veterans Affairs website listed in the helpful links section.