The home loan program for veterans was instituted in 1944 through the Servicemen's Readjustment Act, otherwise known as the G.I. Bill. The bill provides veterans with the ability to receive a federally guaranteed mortgage with no down payment, according to financial counselors at VA Loans.com. Loans are provided by banks and other private lenders and insured against default by the federal government.
Eligibility
The original law ruled that veterans who received an honorable discharge from active duty service for at least 90 days during wartime or 181 continuous days during peacetime were eligible to receive a VA loan. Veterans who served in an arm of the military that began after September 7, 1980 must have served for at least two years to be eligible for a VA mortgage. VA mortgage benefits are available to officers who served at least two years after October 16, 1981. National guard members and reservists must have served for six years to be eligible.
Amounts
VA-protected loans cannot exceed $417,000. Veterans must meet other financial requirements to qualify for the loan. Vets may borrow the purchase price or reasonable market value of the property plus the associated fees. The Veterans Administration rules limit the amount of closing costs a borrower can incur. Veterans receiving a VA mortgage do not have to purchase personal mortgage insurance (PMI). Lenders charge an additional one percent flat fee for VA loans in addition to other closing costs. Disabled veterans are exempt from the fee.
Occupancy
VA mortgage financing regulations require veterans who receive a VA loan to use the property as their primary residence. The rules state that a veteran must live in the home or have the intention of moving into the dwelling within 60 days of closing on the loan. A VA loan is not limited to first-time homebuyers. Veterans can reuse the benefit over and over. VA loans are assumable as long as the person assuming the loan also is qualified.
Co-Signors
The VA recognizes legally married spouses as qualified co-signors on a VA mortgage. As such, a spouse's income may be used when judging financial eligibility for a loan. More than one eligible veteran can purchase a home together and the entitlement fee is split between the borrowers. If a veteran uses a non-veteran or someone other than a spouse as a co-signor, the VA will not guarantee the entire loan. Instead, the VA will insure that portion of the loan that is allocated to the veteran. The Veterans Administration also offers veterans assistance when they have difficulty making mortgage payments.
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