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What is a VA Loan?
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How to Get a Veterans House Mortgage
Did you know that VA loan programs require no down-payment and they are guaranteed by the U.S. Government? VA home loan programs are available to eligible veterans and active military personnel. VA borrowers can choose from no money down home buying, to VA streamline refinancing." Because the Veterans Administration doesn't actually extend loans, but merely guarantees them, you need to apply for a veteran's house mortgage through a lender that participates in the VA home loan program. Before applying for a VA house loan, you must first determine if you are eligible for the loan, then request your Certificate of Eligibility.
How do I obtain a Certificate of Eligibility?
In many cases, your lender will be able to obtain a Certificate of Eligibility for you by using ACE (Automated Certificate of Eligibility). ACE is a web-based application that is able to determine eligibility and issue an online Certificate of Eligibility in a matter of seconds. But, if there is not enough data in VA's database, the certificate will have to be requested from the VA using VA Form 26-1880 and this will require a copy of DD-214 (Certificate of Release or Discharge from Active Duty) showing character of service. Then, like any other purchase loan, you will need to document your income, credit, savings, employment information and whatever information the lender will need to get you qualified for the loan. Get started with your VA loan today. Fill out the free loan quote form on this page and one of our VA lending experts will get back to you shortly.
Once you've determined your eligibility for a VA loan and obtained your Certificate of Eligibility, there are five basic steps when obtaining a VA backed home loan. This is a basic overview of how the process works provided by the Veterans Administration website :
- Select a home you are interested in. The purchase and sales agreement should contain a VA option clause. The contract must also allow the veteran to "escape" from the contract without penalty if he/she is unable to obtain a VA loan. Some veterans prefer to contact a lender to get "pre-qualified" (see how much they can afford) prior to searching for a home.
- Contact a lender to apply for the loan. At this point, if the veteran has not already obtained his/her certificate of eligibility, they will need to. The lender may be able to obtain it off the internet or the veteran may have to complete a form and send it to the appropriate eligibility center. In either case the lender will be able to assist in the procedures of how to obtain a certificate of eligibility. The lender will complete a loan application and gather supporting documentation, i.e., paystubs and bank statements. An important item for veterans to know is that lenders set their own interest rates, discount points and closing points.
- The lender will "process" (develop) all credit and income information. Lenders are allowed to use VA approved automated underwriting systems. The lender will also order a VA appraisal. VA's appraisal is not a home inspection or a guaranty of value. It is an estimate of the market value as of the date the inspection is made comparing it to similar homes that have recently sold in that area. Although the appraiser does look for obviously needed repairs, VA does request that appraisers not address cosmetic items. VA does not warrant the condition of existing homes. The appraiser is a licensed individual who does not work for VA but is chosen by VA to assure his/her review is unbiased in any way. The lender cannot request which appraiser to use, they are assigned on a rotation basis.
- Upon receipt of the appraisal and all supporting documentation on credit, income and assets, the lender will "underwrite" the loan. It is the lender who reviews all the data collected and decides if the loan should be granted, developed for additional data or if the veteran does not qualify and must be denied. Although VA does "underwrite" some loans, it is very rare. The decision on whether or not to approve the loan is generally made by the lender.
- The final step for loans that meet VA regulations and guidelines is the loan "closing" (when the transfer actually takes place). The lender chooses the title company, attorney or if their representative will conduct the closing. The title company, attorney or lender representative who will handle the closing will coordinate the date and time. If there are any questions during the process that the lender cannot assist you with, please contact a VA representative.
I've already had a VA loan. Can I get another one?
According to the VA, your eligibility is reusable depending on the circumstances. Normally, if you have paid off your prior VA loan and disposed of the property, you can have your eligibility restored for additional use. Also, on a one-time only basis, you may have your eligibility restored if your prior VA loan has been paid in full but you still own the property. In either case, to obtain restoration of eligibility, the veteran must send VA a completed VA Form 26-1880 to the VA's Winston-Salem Eligibility Center. To prevent delays in processing, it is also advisable to include evidence that the prior loan has been paid in full and, if applicable, the property disposed of. This evidence can be in the form of a paid-in-full statement from the former lender, or a copy of the HUD-1 settlement statement completed in connection with a sale of the property or refinance of the prior loan.
Resources: VA Form 26-1880, VA Home Loan Eligibility F.A.Q, VA House Loans
Benefits of VA Loans
In addition to the obvious benefits of being able to get up to 100% financing and not having to pay private mortgage insurance (PMI), according to the military.com website, the VA loan comes with important safeguards to protect the borrower, including these:
- The VA may suspend from the loan program those who take unfair advantage of veteran borrowers, or decline to sell a new home or make a loan to an eligible veteran of good credit because of race, color, religion, sex, disability, family status or national origin.
- The builder of a new home is required to give the purchasing veteran a one-year warranty that the home has been constructed to VA-approved plans and specifications. A similar warranty must be given for new manufactured homes.
- In cases of new construction completed under VA or HUD inspection, the VA may pay or otherwise compensate the veteran borrower for correction of structural defects seriously affecting livability if assistance is requested within four years of a home loan guaranty.
- The borrower obtaining a VA loan may only be charged the fees and other charges prescribed by VA as allowable.
- The borrower can prepay without penalty the entire loan or any part not less than the amount of one installment or $100.
- The VA encourages holders to extend forbearance if a borrower becomes temporarily unable to meet the terms of the loan.