VA Loans Explained

Homebuyers have many choices when it comes to home loans. It can be tough to determine which one is right for you. But if you’re a veteran, then a VA loan may be just the ticket. Although the process of applying and qualifying for a VA loan may seem a little daunting, it can certainly be worth the trouble. If you’re interested in learning more about VA loans, read on.

What is a VA loan?

A VA loan is a type of mortgage that is issued by a private lender. However, the U.S. Department of Veterans Affairs partially backs this type of loan. This means that the government will repay part of your loan should you default. Since lenders assume less risk with this type of loan, it requires no down payment and offers better interest rates and terms than a conventional loan.

Who qualifies for a VA loan?

VA loans are available to active duty service members, veterans, and widows of military spouses. However, be aware that VA loans may only be used for a borrower’s primary residence. You cannot use a VA loan to purchase a second home or investment property. They are typically used for homes that are move-in ready.

What are the eligibility requirements?

In order to qualify for this kind of loan, you must meet specific requirements. These include:

• You must have served at least 90 consecutive days of active service during a time of war.
• You must have served at least 181 days of active service during times of peace.
• Have served for at least six years as an active member of the National Reserves or National Guard.
• Have been married to a service member who died in the line of duty or because of a disability related to their service.

How much does the government guarantee?

As of 2019, the VA guarantees up to 25 percent of the amount of the loan, up to $121,087. That equates to a loan of $484,350. In areas where housing costs are significantly higher, the threshold is up to $726,525. The VA will not guarantee any amount that exceeds those thresholds.

Are there fees?

While a VA loan does not require you to have mortgage insurance, you day have to pay a mandatory fee. The fee can change depending on many factors, including the type of service and whether or not you make a down payment. This fee is collected by the Department of Veterans Affairs to cover losses and ensure the continuation of the program for many generations. However, there is no pre-payment penalty should you pay off the loan early, which can save you a significant amount of interest over the life of the loan.

What about past bankruptcies or foreclosures?

If you’ve had a foreclosure or bankruptcy in the past, it does not mean you cannot qualify for a VA loan, but you should still consider getting a bankruptcy attorney. Even if your foreclosure was for a previous VA loan, it does not hinder your ability to utilize this benefit again.

What if I have questions?

If you have any more questions about the VA loan program, visit the U.S. Department of Veterans Affairs website or talk to a professional real estate agent in your area.

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