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VA Mortgage Loan Benefits & Advantages for Veterans

VA loans provide veterans purchasing a new home with numerous advantages compared to conventional residential real estate loans.

How does VA Guaranty for home loans work?

VA guaranty applies to Veterans purchasing a residential property to be occupied as a primary residence. The actual loan underwriting is performed by mortgage lending institutions. Banks, Mortgage lenders, Credit unions and other companies that provide residential financing underwrite the loans for eligible veterans according to the criteria required to fulfill VA guaranty requirements.

VA doesn’t directly involve itself in making out the loans to qualified veterans. The entire process must be initiated by applying through a lender interested in making loans satisfying VA guidelines. A lender performs the traditional underwriting and approves a borrower. After the loan approval, theysubmit the loan for VA guaranty. If the loan meets all conditions satisfactorily, VA guarantees a portion of the loan amount to the lender against default. Due to this added protection against default, the mortgage lender will be willing to fund a home loan for primary occupancy for Veterans at very flexible and favorable loan terms, compared to conventional home loans.

100% Home Purchase Financing

In the current lending environment, most of the institutions funding home loans require a large down payment. The underwriting criterion used in conventional financing is also extremely rigid. But with a VA guaranteed loan, eligible veterans who meet the requirements can avail 100% financing through a single loan.

Depending on the lender’s underwriting guidelines, this may vary. But in most cases, it’s possible to buy a home with little or no down payment. A lender may require down payment, only in situations where the purchase price is unreasonable compared to the property value.

By combing the VA loan benefit with seller-paid closing costs and assistance from any other housing program, a veteran can purchase a new home with no out of pocket expenses. Even FHA and other government programs do not offer this feature.

Fixed or Adjustable Loan Options

The interest rates on VA loans can be negotiated. The rates and points are determined by the VA lender underwriting and funding the loan. Both fixed rate mortgage programs and adjustable rate programs are available. These options provide flexibility and are advantageous to borrowers planning to sell or move out of the property in a few years.

The VA guaranty doesn’t stipulate neither income nor asset limits. But the lender funding the VA mortgage may require them to protect themselves.

Flexible Service Requirements

The military service requirements needed to become eligible can be satisfied by most veterans. Even reservists and National Guard members become eligible, if they had been on active duty in support of war (Title 10) for 90 days. Other Reserve or National Guard members need 6 years if they were only involved in service/drill. The service guidelines are reasonable and designed to extend the home loan benefit to most veterans.

As the VA loan doesn’t require qualification under stringent debt/income ratios, residual income can be demonstrated to qualify for guaranty benefit.

Automated & Streamlined Underwriting

Like conventional loan underwriting, the most important functions in processing a VA loan can be done electronically. Automated underwriting systems like DU and LP, standard for agency (Fannie Mae and Freddie Mac) loans, are also accepted by VA to determine a borrower’s eligibility. Automated systems are also set in place by VA to select an appraiser, determine the property value (Notification of Value) and obtain a Certificate of Eligibility (COE).

Condos, Mobile & Manufactured Homes Allowed

Veterans who wish to buy a condo can do so with a VA guaranteed home loan provided they are located in a condominium or PUD that has VA approval. Mobile and Manufactured homes that are permanently affixed are also eligible as long as they are located on their own land. There are no size or age requirements to seek a VA loan benefit.

Assistance is provided to veterans who have fallen behind on their monthly mortgage payments. VA loans are also assumable with very few restrictions.

A veteran’s home loan benefit doesn’t get extinguished through a single use. The benefit can be used again. This is especially useful for lenders who want to purchase and move into a new primary residence in the future.

What is not covered under VA Guaranty for Home Loans?

VA Guaranty doesn’t make any warranties regarding the condition of the property. Any defects or problems with a home are not covered by VA. Only a certain mandated portion of the loan amount is guaranteed to the lender making the VA loan to a veteran buying a new primary residential property. A home inspection paid for by the buyer must be performed by a certified home inspector in order to ensure a home is free of any defects or deficiencies.

An appraisal performed by a VA approved appraiser is only an opinion regarding the property’s value. It cannot be construed as a statement regarding the soundness of the property, even though due consideration will be given to do so in the appraisal report.

VA doesn’t make any claims about the value or suitability of a property for the veteran purchasing it. A buyer should carefully determine this factor on his own. Any professional legal help needed by a veteran regarding a VA loan must be obtained on his own, as VA doesn’t offer any legal services.

Even when a home is built under the VA inspection process, the department cannot compel the approved builder who constructed the property to fix any defects that may already be present or may arise down the line. Builders that do not act may be suspended or removed from the VA’s builder program.