VA Mortgage Loans-Paving Way for Home Ownership

What makes you eligible for a VA mortgage loans

VA mortgage loans are meant for veterans who have been active on duty and had a discharge not due to any kind of dishonor. The veteran should have been in service for a minimum of 90 days during a war or must have served a minimum of 181 days continuously when there was peace. If a veteran served after September 7, 1980 he has to be enlisted for at least 2 years.

The Veteran Administration guarantees the VA mortgage loans. The mortgage loans are usually provided by approved or qualified creditors. The VA loan rate is determined by several factors, credit history being one of them. However, the rates are highly competitive. Only the last 12 months credit history of the veterans is taken into consideration. Tax liens, debt collection and bankruptcy affect the eligibility of a veteran.

The veterans are not required to pay PMI or private mortgage insurance and enjoy 100% financing. This benefit can also be enjoyed by the spouses of the veterans if they have not married again.

How does the VA mortgage loan work?

The veterans have to shell out a funding fee of 3.3% of the loan if they are to receive VA mortgage. This fee can be added into the mortgage. No closing costs are applicable to veterans. The conventional closing costs which vary between 3% and 5% of the value of a loan are replaced by this fee.

There is another benefit that can be availed by veterans. They can enjoy streamlined refinancing. Veterans are allowed to refinance the existing loans into a lower interest rate and they do not have to qualify again for the same. This implies that they can avoid home appraisals, income documentation and income verification.

Maximum permissible amount

USD$417,000 is the maximum mortgage amount that a creditor will permit for 100% financing. If a veteran wants to buy a more expensive house, the difference has to be the down payment.

How are creditors protected?

Since VA mortgage loans offer a wide range of benefits for the veterans, a creditor will usually shrink from offering credit. However, to safeguard the creditors, the Veteran Administration offers the necessary protection.

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