One important question some newcomers to the VA loans program have about VA insured mortgages involves the length of the VA home loan; what's the longest amount of time a borrower can apply for with a VA mortgage?
According to the VA Lender's Handbook, non-amortized loans have a maximum maturity of five years. All amortized VA mortgages have a maximum maturity of 30 years and 32 days. VA loan rules specify that, "...all VA loans must be amortized if the maturity date is beyond 5 years from the date of the loan. Loans with terms less than 5 years are considered term loans and need not be amortized."
That is from Chapter Three of the VA Lender's Handbook in the Amortization section. Chapter Three also has some rules about the nature of VA loan payments, saying, "...every loan must be repayable within the estimated economic life of the property securing the loan. The period for repayment of a loan is measured from the date of the note or other evidence of indebtedness."
There may be exceptions to the amortization rules described here IF the VA loan in question meets the right criteria. According to Chapter Three:
"Certain amortization plans which do not meet the requirements described in subsection a above may be used if approved in advance by VA. A lender may submit an amortization plan to VA for prior approval if the plan:
- is generally recognized; that is, is used extensively by established lending institutions, but
- does not meet the requirements of approximately equal periodic payments and a reduction in principal not less often than annually.
When talking about VA loan amortization, it's important to know the rules about loans that may be due beyond the VA maximum maturity guidelines, as well as the rules governing the final payment of the loan. According to Chapter Three:
"VA regulations provide that any amounts, which fall due beyond themaximum maturity automatically, fall due on the maximum maturity date. Thus, if a lender inadvertently makes a loan that exceeds the maximum maturity, it may still be subject to guaranty. However, the regulations also limit the amount that can be collected as a final installment, such as, they prohibit excessive ballooning. The holder of a loan that violates this provision may desire to correct the situation through means which are legally proper in the jurisdiction."
Do you have questions about VA loans? Ask us in the comments section.
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