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The
Department of Veterans Affairs Home Loan Program
VA-Guaranteed
Home Loans for Veterans
The main purpose of the VA home loan
program is to help veterans finance the purchase of homes with favorable
loan terms and at a rate of interest which is competitive with the rate
charged on other type of mortgage loans. As with FHA loans, the VA
will approve individuals using much easier credit standards than
conventional loans.
6 Steps in
Arranging a Veteran's Guaranteed Loan.
- Find the property suitable for your
needs.
- Apply for
the loan.
- Be prepared to present your discharge
or separation papers and/or a Certificate
of Eligibility.
- Lender will order a property
appraisal by an approved appraiser.
- Estimate of property's reasonable
value is determined.
- If application is approved, you get
the loan.
VA-guaranteed
financing is available for any of the following:
- To buy a home.
- To buy a townhouse or condominium unit
in a project that has been approved by VA.
- To build a home.
- To simultaneously purchase and improve a
home.
- To refinance an existing home loan.
- To refinance an existing VA loan to
reduce the interest rate.
- To buy a manufactured (mobile) home
and/or lot.
Refinancing Loans Are Available:
a. To pay off the mortgage and/or other
liens of record on the home. In most cases, the loan may not exceed 90
percent of the reasonable value of the property as determined by an
appraisal, plus the funding fee, plus closing costs, including a
reasonable number of discount points. A veteran must have available home
loan entitlement.
b. To refinance an existing VA loan to
obtain a lower interest rate, commonly called "VA Streamline",
due to the ease and quickness of the process. The loan amount is limited
to the balance of the old loan plus the closing costs, discount points,
funding fee, and up to $6,000 in energy efficient improvements.
APPLYING
FOR A VA LOAN
VA-guaranteed loans are obtained by making
application to private lending institutions, not the Veterans
Administration. Our lenders will have the forms and other necessary papers
to apply for a certificate of eligibility
as well as for the loan and can help you fill them out.
You can reduce delays in the processing of
the loan, if you are prepared to provide the complete names and addresses
and your employee identification numbers for present and past employers
covering a 2 year period. You should also have available the location
and account numbers for savings and checking accounts. |
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TYPES OF VA
HOME LOANS
- Traditional Fixed Payment Mortgage.
Typically 15 to 30 year terms. No downpayment required if property
value is sufficient to cover the loan.
- GPM (Graduated Payment Mortgage).
Smaller payments in the initial 5 years allow for qualification with
lower incomes. Some downpayment required.
- Buydowns. Seller "buys
down" vet's mortgage payments in the first few years with a lump
sum payment at closing to supplement vet's payments. No downpayment
required.
VA does not require a down payment if the
purchase price or cost is not more than the reasonable value of the
property as determined by VA. If the purchase price or cost is more
than the reasonable value, the difference must be paid in cash from your
own resources.
However, if interest rates go down, and you
still own and occupy (or previously occupied) the property securing a
previous VA loan, you may apply for a new VA loan to refinance the
previous loan at a lower interest rate without using any additional
entitlement.
CLOSING
COSTS
The VA regulates the closing costs that a
veteran may be charged in connection with closing a VA loan. No commission
or brokerage fees may be charged to you for obtaining a VA loan. However,
you may pay reasonable closing costs to the lender in connection with a VA
guaranteed loan. Although some additional costs are unique to certain
localities, the closing costs generally include VA appraisal, credit
report, survey, title evidence, recording fees, a 1 percent loan
origination fee, and discount points. The closing costs and origination
charge may not be included in the loan, except in VA refinancing loans.
Often, sellers will consider paying some or
all of the discount points required in order to complete the sale. This
can have a big impact on the amount of cash you must pay out of pocket in
order to complete the purchase. If the seller will not consider paying
points, the veteran may take an interest rate sufficient to avoid the need
to include any discount points in the transaction.
Except in certain disability circumstances,
a VA funding fee of 2.00 percent of the loan amount (2.75 percent for
reservists) is also payable at the time of loan closing but may be
included in the loan. If the veteran wishes to make a downpayment,
the funding fee can be reduced to as little as 1.25%. A more detailed
discussion of closing costs may be found in VA Pamphlet 26-6. |
