The VA home loan program was instituted in 1944 when President Franklin D. Roosevelt signed the Servicemen's Readjustment Act, which is typically referred to as the G.I. Bill. The program doesn't actually lend the money for the home to the veteran, but it does guarantee a percentage of the cost of the home to the lending institution. These percentages range from 50 percent for lower-cost homes to much less for more expensive dwellings.
Service Regulations
Not all servicemen are automatically qualified to receive a VA loan. To be qualified, a military member must have served for 90 or more consecutive days during war or 180 or more consecutive days during peacetime and not have received a dishonorable discharge. Those who joined the armed forces after Sept. 7, 1980, are required to have served for two years, as are officers who joined the service after Oct. 16, 1981. Members of reserve services, such as the National Guard or Coast Guard Reserve, must have actively served for a period of six years, although the service does not have to be continuous.
Credit Regulations
As the loans are made by financial institutions, veterans will have to qualify for the loan on the basis of their credit and income. The VA loan guarantee does remove some of the risk, so lenders are more likely to be lenient with their typical lending qualifications.
Loan Regulations
There is no maximum amount for a VA Loan, however the government will only guarantee a maximum of $104,250. As most lenders will generally want a guarantee of 25 percent of the cost of the home, that tends to put a cap of $417,000 into place. That amount has been increased to $539,475 in Alaska, California and Hawaii. There is also a limit to the closing costs that can be charged to the veteran.
Home Regulations
The home must be located in the United States or its territories and must be the primary residence for the veteran. The exception is that a VA loan may be used to purchase income property up to four units, provided the borrower makes one of the units his primary residence. The home must also pass a termite inspection, which cannot be paid for by the home buyer.
Member Comments