Buying a home may very well be one of (if not THE) largest investments you'll make, so finding that you qualify for a program that will help make it a little easier and cheaper is always a bonus. The U.S. Department of Veterans Affairs runs just such a program, and has helped many service men and women buy homes. Read on for a list of frequently asked questions about VA loans.
What Is a VA Loan?
A VA loan is a mortgage that is guaranteed by the U.S. Department of Veteran's Affairs. These loans are approved and funded by private financial institutions like banks, mortgage companies and credit unions for active service personnel, reservists, the National Guard and veterans. VA loans are attractive to lenders because the government guarantees 25 percent of the loan if the borrower defaults, eliminating much of the lender's risk.
What Makes a VA Loan Better?
Among the frequently asked questions about VA loans is "Why get one?" Purchasing a home and arranging a mortgage requires time, effort, and paperwork, and it may seem like a hassle to add even more paper to what may be an already stressful time. However, a VA loan can help qualified borrowers arrange a mortgage at competitive interest rates and with little or no down payment, and it doesn't require borrowers to get mortgage insurance (there is an upfront funding fee, which can be wrapped into the mortgage if the buyer prefers). It can also help homeowners who want to refinance their mortgage or cash out some home equity.
Other programs that fall under the VA loans umbrella may benefit Native American veterans, servicemen and women, as well as those veterans with service-related permanent disabilities who need to make modifications to their living spaces.
Who Can Qualify for a VA Loan?
"Who qualifies?" is another of the frequently asked questions about VA loans. Eligible borrowers may include currently active service people, honorably discharged veterans, National Guard and reserve members, and some surviving spouses of the above groups.
Borrowers must also have satisfactory credit and sufficient income to qualify for VA mortgages. Certain other groups of borrowers may also qualify, including Public Health officers, and United States Air Force, Military, or Coast Guard cadets. You will need a Certificate of Eligibility (COE) to apply for a VA loan.
What Kind of Home Can I Buy With a VA Home Loan?
VA loans must be used for properties that borrowers will occupy as their primary residence. Don't expect to use a VA loan for a vacation home or investment property (unless it's a 2-4 unit property and you live in part of it). A VA loan may be used to purchase homes or condos in VA-approved projects, to build a house, or to purchase a lot and/or a prefabricated home. VA loans may even be used to renovate or improve existing homes.
What if My VA Loan Is Denied?
The first thing to do if your VA loan is denied is to find out why -- and to realize that your loan has been turned down by the lender, not by VA. By law, your lender has to send you a credit denial letter within 30 days of declining your application. Most of these letters are pretty generic, but you can probably get more information by speaking to your lender. Get as much detail as possible about the reason(s) for the denial. Possible reasons include not enough income to support the loan amount or issues with your credit history and score. If this is the case, check your credit score (you can check your credit score for free at LendingTree, no credit card required and no obligation).
How Do We Apply for a VA Loan?
Applying for a VA mortgage is about the same as applying for a conventional (non-government) loan. If you're in the VA's database, most VA-approved mortgage lenders can get your Certificate of Eligibility for you through the VA's WebLGY system. If not, you can order it by fax or mail. You'll need statements for your bank and investment accounts, and you'll need to document your income. Finally, you need to pass a CAIVRS check -- that means the lender will verify that you haven't defaulted on any government-backed debt like student loans or an FHA mortgage. For more information on applying for a VA loan, contact your lender directly or visit the U.S. Department of Veterans Affairs website.