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What Is a VA Loan?

Today is Veteran’s day so I thought I would dedicate today’s column to all the Veterans out there and to explain one of the benefits of being a Veteran- the VA Guaranteed Loan Program. The program was started in 1944 as part of the Serviceman’s Readjustment Act or the G.I. Bill, as it became known, by President Franklin Roosevelt. The purpose was to help veterans returning from war re-establish credit, purchase housing and to stimulate the economy. Since its inception, the VA Guaranteed Loan Program has helped over 20 million veterans and their families purchase homes.

There have been several changes to the program since it began but the goal has remained the same: to assist Veterans and their families in obtaining loans to purchase or re-finance their homes. VA loans can be used to purchase existing or new construction homes or to re-finance an existing mortgage. This loan program offers several important benefits over other traditional mortgages. Most notably is the opportunity to purchase a home with no down payment and no mortgage insurance. Typically a down payment of at least 3.5 % is required for most loan types. Some form of mortgage insurance is always required unless you have at least 20% to put down on a home. The VA also requires the property to meet certain requirements for it to qualify for this type of financing. The VA appraiser will make sure that the property is safe, sanitary and sound according to the VA loan requirements as well as making sure the property value is consistent with the loan amount.

Who is eligible for the VA Guaranty Loan Program? Any Veteran that meets the service length requirements, active duty service members that meet the length of service requirements, certain Reservist or National Guard members and certain surviving spouses of deceased Veterans. Eligibility information can be found on the VA website at www.ebenefits.va.gov. If you meet the eligibility requirements for the program you must also qualify for the loan with your local VA lender. The requirements the lender uses to qualify the veteran for a loan are not as rigid as

they would be for traditional forms of mortgages. Debt to income ratio is more flexible as are the credit requirements. There is no maximum loan amount but the VA does limit the amount of the loan they will guaranty. Check with your local lender on the income limits in your area. You will need to obtain a Certificate of Eligibility to prove you are entitled to receive benefits and you lender can help you request that from the VA.

There are some misconceptions out there about VA loans being too difficult or that they take too long but that isn’t the case. Your Realtor can help you find a property that will qualify for a VA loan and write the purchase contract to allow appropriate time for the lender to complete the loan process. A typical VA loan closing can occur in 45 to 60 days from the contract date.

For more information about VA guaranteed loans visit the US Department of Veterans Affairs website at www.va.gov. Thank you for your service and happy Veteran’s Day!

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