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.