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VA Home Loans (Part II) What are the Benefits to the Service Member?

By Eric Anderson

Real Estate Agent with Eric Anderson Realty Group 243419

October 14, 2006 06:25 AM

The use of your VA entitlements provides you many benefits. Do you know what a summary of those benefits are?

Q: What is a VA Guaranteed Home Loan?

A: VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fail to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms.

Q: Does my entitlement guarantee that I will get a home loan?

A: No, VA cannot compel a lender to make a loan that would violate their lender policies. Lenders must also comply with VA income and credit standards. If a lender is unwilling to make a loan to you, we can only suggest that you try other lenders.

Q: How much is my entitlement?

A: Your basic entitlement is $36,000. For loans in excess of $144,000 to purchase or construct a home, additional entitlement up to an amount equal to 25 percent of the Freddie Mac conforming loan limit for a single family home may be available. This loan limit changes yearly. This means that qualified veterans could get a no down payment purchase loan of up to $417,000 through December 31, 2006 effective January 1, 2006.

Q: Is there a maximum loan limit?

A: There is no maximum VA loan. Lenders will generally lend up to 4 times the amount of a veterans entitlement without requiring a down payment.

Q: What are the benefits of a VA home loan?

A: There are many benefits of a VA Home loan:

Equal opportunity.
No down payment (unless required by the lender or the purchase price is more than the reasonable value of the property).
Buyer informed of reasonable value.
Negotiable interest rate.
Ability to finance the VA funding fee (plus reduced funding fees with a down payment of at least 5% and exemption for veterans receiving VA compensation).
Closing costs are comparable with other financing types (and may be lower).
No mortgage insurance premiums.
An assumable mortgage.
Right to prepay without penalty.
For homes inspected by VA during construction, a warranty from builder and assistance from VA to obtain cooperation of builder.
VA assistance to veteran borrowers in default due to temporary financial difficulty.