Should You Take Advantage of VA Loan Benefits?

It’s certainly worth looking into if you are:
  • A Veteran
  • Active-duty personnel
  • Reservist/National Guard member
  • An eligible surviving spouse

What makes a VA home loan particularly appealing for many eligible veterans (and their families, when applicable) is that a down payment is not required and they can finance more than 80% of a home’s value or purchase price because mortgage insurance is not required. 

There are some drawbacks too, though, and we’ll guide you through all the questions you’ll want to ask before applying for a VA mortgage. If you’ve already done your homework and know that a VA home loan is right for you get VA mortgage quotes from competing VA home loan lenders.

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What is a VA loan?

A VA loan is a mortgage loan offered to qualifying military personnel, servicemembers, veterans, and eligible surviving spouses by private lenders, and guaranteed by the U.S. Department of Veteran Affairs, in an effort to help qualifying individuals receive favorable terms on a home loan and become homeowners.

Glossary Terms

Federal Collection Policy Notice
Notice to VA home loan borrowers of actions the government can take in the event that they default on their VA-backed home loans. These include but... <a href='/glossary/what-is-federal-collection-policy-notice' title='See the full definition of Federal Collection Policy Notice'>read more</a>
VA Amendatory Clause
This is added to your purchase agreement, must be signed by you and your seller.... <a href='/glossary/what-is-va-amendatory-clause' title='See the full definition of VA Amendatory Clause'>read more</a>
Funding Fee Clause
Part of the required paperwork when borrowers assume VA home loans. It informs them that there is a .5 point assumption fee. <a href='/glossary/what-is-funding-fee-clause' title='See the full definition of Funding Fee Clause'>read more</a>
Assumption Indemnity Clause
A clause informing buyers that they must agree to assume all of the obligations of the original borrower under the terms of the instruments creating... <a href='/glossary/what-is-assumption-indemnity-clause' title='See the full definition of Assumption Indemnity Clause'>read more</a>

What is a VA Loan?

VA loans are home loans designated specifically for people who have served, or are presently serving, in the U.S. military who want to purchase a primary residence.

VA Home Loans were first made available in 1944 when The Servicemen’s Readjustment Act added this additional benefits package to eligible service members. They are administered by the U.S. Department of Veterans Affairs (VA). The VA does not actually lend anyone money; it backs these loans and reimburses private lenders if borrowers default on them. Because this provides a safety net for these lenders, VA loans are widely available and at a reasonable cost.

VA Mortgage lenders offer a variety of home loans that cover a broad range of needs, including:
  • Building a single family home
  • Buying a single family home, a condominium unit in a VA-approved development, or a co-op unit
  • Repairing, renovating or upgrading your primary residence
  • Refinancing a mortgage
  • Buying a manufactured home and/or lot
  • Making energy-efficient improvements like solar heating or cooling systems

The Benefits of a VA Loan

There are many benefits to choosing a VA home loan. According to the U.S. Department of Veterans Affairs:

  • No down payment required (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 percent 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
  • For homes inspected by VA during construction, a warranty from builder and assistance from VA to obtain cooperation of builder.
  • An assistance to veteran borrowers in default due to temporary financial difficulty

What’s the Maximum VA Loan
a Veteran Can Get?

According to the VA 2015 VA County Loan Limits there is "... no maximum that[1] an eligible veteran may borrow using a VA-guaranteed loan." However, there are county limits imposed that must be used to calculate the VA's maximum guaranty amount for a particular county. Generally, an eligible veteran can get a loan up to $417,000 with no money down and in some high-cost locations, up to $1,094,000.

80%
of VA Loan borrowers could not qualify for a conventional loan
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