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Fact Sheet on VA
Guaranteed Loans
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What is a VA Guaranteed Loan?
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. To get a loan, a veteran must apply
to a lender. If the loan is approved, VA will
guarantee a portion of it to the lender. This
guaranty protects the lender against loss up to the
amount guaranteed and allows a veteran to obtain
favorable financing terms. There is no maximum VA
loan but lenders will generally limit VA loans to
$417,000 This is because lenders sell VA loans in
the secondary market, which currently places a
$417,000 limit on the loans. For loans up to this
amount, it is usually possible for qualified
veterans to obtain no down payment financing. A
veteran's basic entitlement is $36,000 (or up to
$104,250 for certain loans over $144,000). Lenders
will generally loan up to 4 times a veteran's
available entitlement without a down payment,
provided the veteran is income and credit qualified
and the property appraises for the asking price.
Note: For properties in Hawaii, Guam, Alaska and the U.S. Virgin Islands loan limits can be up to $625,000
VA Loans Offer the Following Important Features:
- Equal opportunity for all
qualified veterans to obtain a VA loan.
- 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. VA assistance to veteran
borrowers in default due to temporary financial
difficulty.
VA Does Not do the Following:
- Guarantee that a home is free
of defects. VA guarantees only the loan. It is
the veteran's responsibility to assure that
he/she is satisfied with the property being
purchased. The VA appraisal is not intended to
be an "inspection" of the property. A veteran
should seek expert advice (a qualified
residential inspection service), as necessary,
BEFORE legally committing to a purchase
agreement.
- If you have a home built, VA
cannot compel the builder to correct
construction defects although VA does have the
authority to suspend a builder from further
participation in the home loan program.
- VA cannot guarantee that a
veteran is making a good investment.
- VA cannot provide a veteran
with legal services.
How Does a Veteran Obtain a VA
Guaranteed Loan?
- Contract to purchase: Veteran
selects home and discusses purchase with seller
or selling agent and signs purchase contract
conditioned on approval of a VA guaranteed loan.
- Loan application: Veteran
selects lender, presents Certificate of
Eligibility, and completes loan application.
Lender will develop all credit information and
request VA to assign a licensed appraiser to
determine the reasonable value for the property.
Veteran will pay for credit report and appraisal
unless the seller agrees to pay. Either VA or
the lender will issue a value for property for
loan purposes based on the appraisal.
- Loan decision: If the
established value is acceptable to all parties
and the lender develops that a veteran is credit
and income qualified, the loan may be approved.
Most lenders are authorized to make this
decision.
- Loan closing: Veteran (and
spouse) attend the loan closing and sign the
note, mortgage, and other related papers. The
lender or closing attorney will explain the loan
terms and requirements as well as where and how
to make the monthly payments.
How Can I Obtain More
Information About VA Home Loans?
Call VA at 1-800-827-1000 or contact a local lender
or real estate professional. Pamphlets available
from VA include:
26-4 VA Guaranteed Loans for Veterans
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