VA Loans

In 1930 The Federal Government created the Department of Veterans Affairs in order to provide special benefits for Veterans. One such benefit was home ownership assistance through the VA home loan program.

It's important to know, Like FHA, the government does not fund the loans. The government's role primarily, is to; create the terms, monitor rates but not set them, create the underwriting and offer a form of insurance to the banks against default. Direct lenders and mortgage companies that are approved to do VA loans actually fund and manage the loan process.

Most Veterans are able to qualify for these home loans as long as they are in good standing with their "Certificate of Eligibility". This Certificate of Eligibility is the first step in obtaining a VA Loan and can and should early on in the process be obtained by the Veteran directly from the VA.

The Cert tells the mortgage provider whether the Veteran is (obviously) eligible to buy a home and for how much. The current limits are $417,000 in most areas and more for high cost areas. VA home loans can be a great alternative to sub-prime loans with higher rates, since VA underwriting allows for some dinged up credit. Technically, credit scores are not a factor but if a client is showing a pattern of poor judgment then they may be ineligible for this loan.

VA loans can be used to also refinance a home with the original VA Funding Fee prorated back to the borrower. The terms can be either fixed or adjustable. Like FHA, VA offers fairly safe adjustable programs, as safe as any adjustable/variable loan can be. Typically VA adjustable have reasonable caps on their adjustable. With the current rate market, looking at both fixed and adjustable is worthwhile.

If a Veteran still owes money to the Government for another obligation, the Cert will provide proof of that information and the Home loan will be adjusted accordingly. VA loans are for primary residences for all occupants on the loan application.

VA home loans have some wonderful features to them, such as: They are more lenient when it comes to credit scores and they require zero money for the down payment. In most cases the seller can also pay for the Veterans closing costs.

VA loans do come with a one time VA Funding Fee (VAFF), which is very similar to Private Mortgage Insurance. VAFF is a one time fee that can also be financed and is a form of payment which is used by the Department of Veterans Affairs to pool money in reserves to offset loan defaults.

Once a Veteran is ready to purchase a home they will sit with a lender to be qualified just like any other borrower. The lender will look at income, debts and credit. The lender will pull the package together and obtain a certificate of commitment which lasts for six months, after which time the lender will have to request an extension.

The process is not difficult and we recommend that all home buyers or loan seekers gather all the necessary paperwork early in the process and remain very organized. We also recommend that Veterans find experienced loan officers that offer fair terms and have an impeccable record of ethics.

Please call if you have any questions. My office lends on VA loans.