VA Loans

The Veterans Administration provides an array of opportunities for America’s veterans and their families to achieve their dreams of home ownership.

The VA does not issue home loans. Instead, it guarantees them, which provides lenders with a significant degree of protection. In turn, prospective home buyers can obtain competitive rates and loan terms, among a host of other benefits.

The VA offers several types of loans, from home construction and home loans to energy improvement. Veterans considering a VA loan must first obtain a Certificate of Eligibility (COE), a document that certifies they meet the loan program’s basic requirements.

Any military member who has served 181 days on active duty during peace time or 90 days during war time may be eligible, along with those who have served at least six years in the Reserves or National Guard. Spouses of service members killed in the line of duty may also be eligible.

Not everyone who is eligible will ultimately qualify for a loan. The VA will ultimately look at a veteran’s credit and financial history, along with several other key indicators. But veterans with poor or even no credit history can obtain a VA home loan. So can those with bankruptcy or foreclosure in their past.

VA loans offer qualified veterans a host of low-cost and even no-cost benefits. Borrowers do not have to provide a down payment on their home or make monthly payments for private mortgage insurance. Interest rates are generally lower on VA loans than on conventional loans.

For active-duty members, the interest rate cannot exceed 6 percent. Many can ultimately switch to interest-only payments, guaranteeing that lenders cannot foreclose on the mortgage. These benefits end three months after the completion of active military service.

Loan values can be up to 100 percent of a home’s value. But the VA has strict VA loan limits throughout the country. The agency recently increased the loan limit in high-cost parts of the country to $729,000.

[We thank VA Loan Expert Jay Buerck for this contribution.   Jay can be reached at jbuerck@vamcenter.com]

Last Updated on August 13, 2009 by Chuck Marunde