Who Qualifies for VA Home Loans
For many veterans and their families, buying a home can be a difficult experience. Many veterans have little patience for the drawn out process of finding a loan, and others have not always had the best luck with credit. Fortunately, Veterans Affairs (VA) can help. Here is how veterans may find out if they qualify for a loan through the VA.
What Is A VA Home Loan?
The VA offers two types of loans. The Purchase Loan involves the VA helping the veteran to purchase a home at a competitive rate, especially if the veteran has trouble finding financing through other means. The Cash-Out Refinance Loan helps veterans to take cash out of their home equity in order to pay off debt, pay for school, make home improvements, or for other reasons. This loan may also be used to help the veteran refinance a non-VA loan into a VA loan.
How Does It Work?
The VA does not become directly involved in the process. It simply backs the loan as it is handled by private lenders. The VA only guarantees a portion of the loan. If a veteran can no longer make payments, then the VA will cover any losses that may occur. Essentially, the VA acts as insurance for the loan.
What Are The Advantages Of A VA Home Loan?
By guaranteeing the home loan, lenders are able to provide several benefits:
- No down payments as long as the sales price does not exceed the appraised value.
- No private mortgage premium requirement.
- The VA limits the closing costs.
- Closing costs may be paid by the seller.
- The lender cannot charge a penalty if the loan is paid off early.
- The VA may be able to provide assistance if there is some difficulty in making payments.
- The veteran may use the benefit more than once.
- VA loans may be assumed by another eligible individual.
In order to qualify for a VA home loan, a veteran must have suitable credit, sufficient income, and be able to obtain a Certificate of Eligibility (COE). In order to qualify for a COE, the veteran must have served a certain amount of time based on their dates of service. For example, a Vietnam veteran must have served at least ninety consecutive days any time between 5 August 1965 and 7 May 1975. For a full list of eligibility dates, visit http://www.benefits.va.gov/HOMELOANS/purchaseco_eligibility.asp.
The spouse of a veteran may also qualify. The unremarried spouse of a deceased service member who passed away while in service or as a result of a service-connected disability, the spouse of a service member who is serving as a prisoner of war or is missing in action, the surviving spouse who remarries after the age of fifty-seven or after 16 December 2003, and the surviving spouse of a totally disabled veteran may qualify for a VA home loan.
Veterans may also re-qualify for a VA home loan if they paid the previous loan in full, the home was sold, or another VA loan-eligible buyer assumes the loan.
What Is The Process?
Before beginning the process, it would be a good idea to find a real estate agent who can help with the process. This will help the veteran understand some of the more complicated concepts and steps. Next, the veteran should find a lender that participates in the VA home loan program. The lender may be able to pre-qualify the veteran, showing them the possible size of the loan and what kind of interest rate they would have.
The veteran must then obtain a COE. More information on the COE process may be found at http://www.benefits.va.gov/HOMELOANS/purchaseco_eligibility.asp. Before seeking the COE, the veteran should have a copy of their DD-214, Social Security Number, and various other forms and information. After obtaining the COE, the veteran must find a home and negotiate a purchase agreement with a VA Options Clause. A good real estate agent will come in handy for this part of the process. The purchase agreement should also contain an escape clause in case the VA loan does not go through.
The veteran should then work with the lender to apply for a VA loan. This will require pay stubs and bank statements in order to determine sufficient income. The lender will also order a VA appraisal of the property to ensure the loan amount does not exceed the property value. They will also perform a credit check. After reviewing credit, income, and assets, the lender will make a decision concerning the loan’s approval.
If the loan is approved, then the lender will choose a title company, an attorney, or an agent of their choosing to conduct the closing. This person will determine the time and date that the property is transferred to the veteran.
Are There Any Limits On The Amount To Be Borrowed?
The VA does not set limits on how much the veteran may borrow, but it does cap off the amount that the VA will insure. The VA generally assumes up to $36,000 in liability. Lenders will usually loan up to four times that amount without requiring a down payment.
VA loans give veterans options to ensure that they are taken care of in the home-buying process. More information can be found at http://www.benefits.va.gov/HOMELOANS/purchasecashout.asp. Veterans have earned the privilege to own a home. VA home loans help them to accomplish just that.