VA Loan Faq
Q: What is a VA Home Loan?
A: VA guaranteed home loans are made banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home which must be for their own personal occupancy. The guaranty is substituted in place of a down payment which a lender would normally require to get a great rate.
Q: Does my VA eligibility guarantee I will get a new home loan?
A: No, VA cannot make a lender do a loan that would violate their policies. Lenders must abide by VA credit and income standards as well as their own. If a lender is unwilling to make a loan to you, we can only suggest that you try other lenders.
Q: How much is my VA entitlement?
A: Your basic entitlement is $36,000. For any of the loans in excess of $144,000 to purchase or construct a home, additional entitlement up to an amount equal to 25 percent of the VA county loan limit for a single family home may be available. This loan limit can change yearly. The conforming loan limit for 2008 is $417,000 ($625,500 for Hawaii, Alaska, Guam and U.S. Virgin Islands). This means that qualified veterans could get a no down payment purchase loan for those amounts.
Q: How do I get a VA Home Loan?
A: Here are the steps: Find a home and discuss the purchase with the seller or selling agent. Get a signed purchase contract conditioned on approval of your VA home loan. Then you select a lender, present them with your Certificate of Eligibility if available, and complete a loan application. The lender can also obtain a Certificate of Eligibility on your behalf. The lender will develop all credit and income information. They will also request VA to assign a licensed appraiser to determine the reasonable value for the property. A Certificate of Reasonable Value will be issued. The lender will let you know the decision on the loan. You (and spouse) attend the loan closing. The lender or closing attorney will explain the loan terms and requirements as well as where and how to make the monthly payments. Sign the note, mortgage, and other related papers.
Q: What are the benefits of a VA home loan?
A: There are many benefits of a VA Home loan:
1. Equal opportunity.
2. No down payment (unless required by the lender or the purchase price is more than the reasonable value of the property).
3. Buyer informed of reasonable value.
4. Negotiable interest rate.
5. Ability to finance the VA funding fee (plus reduced funding fees with a down payment of at least 5% and exemption for veterans receiving VA compensation).
6. Closing costs are comparable with other financing types (and may be lower).
7. No mortgage insurance premiums.
8. An assumable mortgage.
9. Right to prepay without penalty.
10. Homes inspected by VA during construction, a warranty from builder and assistance from VA to obtain cooperation of builder.
11. VA assistance to veteran borrowers in default due to temporary financial difficulty.
Q: What can the VA not do?
A: Guarantee that a home is free of defects. The VA can only guarantee the loan. It is your responsibility to assure that you are satisfied with the property being purchased. The VA appraisal is not intended to be an "inspection" of the property. You should seek expert advice (a qualified residential inspection service), as necessary, BEFORE legally committing to a purchase agreement. If you have a home built, VA cannot compel the builder to correct construction defects although VA does have the authority to suspend a builder from further participation in the home loan program. VA cannot guarantee that you are making a good investment. VA cannot provide you with legal services.
Q: Can I get a VA loan if I have had a bankruptcy in the last few years?
A: The fact you and/or your spouse have been adjudicated bankrupt does not in itself disqualify you for a VA refinance home loan. The following rules apply: If the bankruptcy was discharged more than 2 years ago, it may be disregarded If the bankruptcy was discharged within the last 1 to 2 years, it is probably not possible to determine that you and/or your spouse are a satisfactory credit risk unless both of the following requirements are met: you and/or your spouse have reestablished satisfactory credit, and the bankruptcy was caused by circumstances beyond your and/or your spouses control (such as unemployment, medical bills, etc.)If the bankruptcy was discharged within the past 12 months, it will not generally be possible to determine that you and/or your spouse are satisfactory credit risks.
Q: Why do I have to pay a fee for a VA home loan? Since I paid a fee for my first loan, why is there a larger fee for my second loan?
A: The VA funding fee is required by law. The fee is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a down payment is slightly higher. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment. First and second time users who make a down payment of at least 5 percent pay a reduced funding fee of 1.5 percent and the same as first time users making the same down payment. For a 10 percent down payment, the fee drops to 1.25 percent. The effect of the funding fee on a veteran's financial situation is minimized since the fee may be financed in the loan. National Guard and Reservist veterans pay a slightly higher funding fee percentage. To determine the exact funding fee percentage, please review the funding fee table.
Q: I want to buy a house with a VA loan. Do I need to occupy the property?
A: The law requires that you certify that you intend to occupy the property as your home. This requirement is considered satisfied if you actually intend to occupy the property as your home and in fact so occupy it when the loan is closed or within a reasonable time afterward.
Q: I am a single veteran stationed overseas and want to buy a home in my home town. My friends who are married can do this with their spouses occupying the property in their place, but VA says I can't do this with my parents or other relatives occupying on my behalf. Isn't this discrimination against single veterans?
A: The law specifically provides that occupancy by the veteran's spouse satisfies the personal occupancy requirement. The law makes no provision for occupancy by any other relatives as a substitute for personal occupancy by the veteran.
Q: May a veteran join with a non veteran who is not his or her spouse in obtaining a VA loan?
A: Yes, but the guaranty is based only on the veteran's portion of the loan. The guaranty cannot cover the nonveteran's part of the loan. Consult lenders to determine whether they would be willing to accept applications for joint loans of this type. Lenders that are willing to make these types of loans will likely require a down payment to cover risk on the unguaranteed, nonveteran's portion of the loan. Unlike other loans, the lender must submit joint loans to VA for approval before they are made.
Both incomes can be used to qualify for the loan. However, the veteran's income must be sufficient to repay at least that portion of the loan related to the veteran's interest in (portion of) the property and the nonveteran's income must be adequate to cover the rest.
Q: If a veteran dies before the loan is paid off, will the VA guaranty pay off the balance of the loan?
A: No. The surviving spouse or other co-borrower must continue to make the payments. If there is no CO-borrower, the loan becomes the obligation of the veteran's estate. Mortgage life insurance is available but must be purchased from private insurance sources.
A: VA guaranteed home loans are made banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home which must be for their own personal occupancy. The guaranty is substituted in place of a down payment which a lender would normally require to get a great rate.
Q: Does my VA eligibility guarantee I will get a new home loan?
A: No, VA cannot make a lender do a loan that would violate their policies. Lenders must abide by VA credit and income standards as well as their own. If a lender is unwilling to make a loan to you, we can only suggest that you try other lenders.
Q: How much is my VA entitlement?
A: Your basic entitlement is $36,000. For any of the loans in excess of $144,000 to purchase or construct a home, additional entitlement up to an amount equal to 25 percent of the VA county loan limit for a single family home may be available. This loan limit can change yearly. The conforming loan limit for 2008 is $417,000 ($625,500 for Hawaii, Alaska, Guam and U.S. Virgin Islands). This means that qualified veterans could get a no down payment purchase loan for those amounts.
Q: How do I get a VA Home Loan?
A: Here are the steps: Find a home and discuss the purchase with the seller or selling agent. Get a signed purchase contract conditioned on approval of your VA home loan. Then you select a lender, present them with your Certificate of Eligibility if available, and complete a loan application. The lender can also obtain a Certificate of Eligibility on your behalf. The lender will develop all credit and income information. They will also request VA to assign a licensed appraiser to determine the reasonable value for the property. A Certificate of Reasonable Value will be issued. The lender will let you know the decision on the loan. You (and spouse) attend the loan closing. The lender or closing attorney will explain the loan terms and requirements as well as where and how to make the monthly payments. Sign the note, mortgage, and other related papers.
Q: What are the benefits of a VA home loan?
A: There are many benefits of a VA Home loan:
1. Equal opportunity.
2. No down payment (unless required by the lender or the purchase price is more than the reasonable value of the property).
3. Buyer informed of reasonable value.
4. Negotiable interest rate.
5. Ability to finance the VA funding fee (plus reduced funding fees with a down payment of at least 5% and exemption for veterans receiving VA compensation).
6. Closing costs are comparable with other financing types (and may be lower).
7. No mortgage insurance premiums.
8. An assumable mortgage.
9. Right to prepay without penalty.
10. Homes inspected by VA during construction, a warranty from builder and assistance from VA to obtain cooperation of builder.
11. VA assistance to veteran borrowers in default due to temporary financial difficulty.
Q: What can the VA not do?
A: Guarantee that a home is free of defects. The VA can only guarantee the loan. It is your responsibility to assure that you are satisfied with the property being purchased. The VA appraisal is not intended to be an "inspection" of the property. You should seek expert advice (a qualified residential inspection service), as necessary, BEFORE legally committing to a purchase agreement. If you have a home built, VA cannot compel the builder to correct construction defects although VA does have the authority to suspend a builder from further participation in the home loan program. VA cannot guarantee that you are making a good investment. VA cannot provide you with legal services.
Q: Can I get a VA loan if I have had a bankruptcy in the last few years?
A: The fact you and/or your spouse have been adjudicated bankrupt does not in itself disqualify you for a VA refinance home loan. The following rules apply: If the bankruptcy was discharged more than 2 years ago, it may be disregarded If the bankruptcy was discharged within the last 1 to 2 years, it is probably not possible to determine that you and/or your spouse are a satisfactory credit risk unless both of the following requirements are met: you and/or your spouse have reestablished satisfactory credit, and the bankruptcy was caused by circumstances beyond your and/or your spouses control (such as unemployment, medical bills, etc.)If the bankruptcy was discharged within the past 12 months, it will not generally be possible to determine that you and/or your spouse are satisfactory credit risks.
Q: Why do I have to pay a fee for a VA home loan? Since I paid a fee for my first loan, why is there a larger fee for my second loan?
A: The VA funding fee is required by law. The fee is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a down payment is slightly higher. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment. First and second time users who make a down payment of at least 5 percent pay a reduced funding fee of 1.5 percent and the same as first time users making the same down payment. For a 10 percent down payment, the fee drops to 1.25 percent. The effect of the funding fee on a veteran's financial situation is minimized since the fee may be financed in the loan. National Guard and Reservist veterans pay a slightly higher funding fee percentage. To determine the exact funding fee percentage, please review the funding fee table.
Q: I want to buy a house with a VA loan. Do I need to occupy the property?
A: The law requires that you certify that you intend to occupy the property as your home. This requirement is considered satisfied if you actually intend to occupy the property as your home and in fact so occupy it when the loan is closed or within a reasonable time afterward.
Q: I am a single veteran stationed overseas and want to buy a home in my home town. My friends who are married can do this with their spouses occupying the property in their place, but VA says I can't do this with my parents or other relatives occupying on my behalf. Isn't this discrimination against single veterans?
A: The law specifically provides that occupancy by the veteran's spouse satisfies the personal occupancy requirement. The law makes no provision for occupancy by any other relatives as a substitute for personal occupancy by the veteran.
Q: May a veteran join with a non veteran who is not his or her spouse in obtaining a VA loan?
A: Yes, but the guaranty is based only on the veteran's portion of the loan. The guaranty cannot cover the nonveteran's part of the loan. Consult lenders to determine whether they would be willing to accept applications for joint loans of this type. Lenders that are willing to make these types of loans will likely require a down payment to cover risk on the unguaranteed, nonveteran's portion of the loan. Unlike other loans, the lender must submit joint loans to VA for approval before they are made.
Both incomes can be used to qualify for the loan. However, the veteran's income must be sufficient to repay at least that portion of the loan related to the veteran's interest in (portion of) the property and the nonveteran's income must be adequate to cover the rest.
Q: If a veteran dies before the loan is paid off, will the VA guaranty pay off the balance of the loan?
A: No. The surviving spouse or other co-borrower must continue to make the payments. If there is no CO-borrower, the loan becomes the obligation of the veteran's estate. Mortgage life insurance is available but must be purchased from private insurance sources.
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