In 1944, congress created what is known as the VA Loan Guaranty Program and its purpose is to help service members obtain their own homes. More than 18 million members have already been helped.
VA Loans Explained?
This type of loan could very well be the most flexible option on the market today. The VA agrees to pay back about a quarter of the loan amount, should the person borrowing the money default. VA-approved lenders have this guarantee when lending to veterans who qualify. It allows the lenders to offer competitive rates and terms to applicants.
What Are The Main Benefits of VA Loans?
The top benefit of a VA loan is the fact that applicants do not have to put any money down. Aside from Fannie Mae’s Home Path and the UDSA’s Rural Development home loan, there is almost no other way to find a company that provides 100% financing options.
VA loans also have less complicated underwriting requirements and standards than regular loans. Around about 80% of people who receive VA loans have not been approved for a regular loan. These type of loans do not include private mortgage insurance, as traditional loans do.
Even though it is not difficult to qualify for VA loan, only about 10% of the nation’s veterans have taken advantage of this unique opportunity. Many veterans are under the impression that they are not eligible, or they just have no idea how to get the ball rolling. Surveys that have been conducted in the past show that at least 20% of veterans had no idea the program existed or how it could benefit their families.
Who is Eligible for VA Loans?
Those who qualify will fall into at least one of the following categories.
1. Members of the military who have served at least three months during the war or 181 days of active duty.
2. Anyone who has spent at least 6 years in either the National Guard or Reserves.
3. The spouses of any member who died while on duty.
The Importance of a Certificate of Eligibility
All active-duty service members and veterans need to get a Certificate of Eligibility first. This is basically a legal document proving that the bearer is in fact entitled to apply for a VA loan.
Downloadable request forms are available online. VA-approved lenders will assist veterans in getting these forms and filling them out correctly. One thing to remember is that not every eligible person will qualify for a loan.
What Can I Buy With This Loan?
VA loans are usually used for building or buying single family homes, but it is possible for veterans to use this money to improve their existing living conditions. Saving money through refinancing is also another possibility.
Veterans Can Use The Money For The Following
1. Refinance an existing loan to lower interest rates.
2. Refinance for the purpose of taking out cash.
3. Buy and improve a home at the same time.
4. Alter, repair or improve on the home that they already have.
5. Buy a home for a single family, provided that it is VA-approved.
6. Make energy efficient improvements via an Energy Efficient Mortgage.
7. Buy a farm, which the veteran will occupy.
8. Buy a modular or manufactured home as well as the lot.
What active-duty members and veterans cannot do, is use the money to buy investment property. VA loans are designed to help veterans to own their own homes.