A VA mortgage is a home loan that is guaranteed by the Department of Veterans Affairs. VA loans have many benefits such as the fact that no down payment is required, however, only veterans may apply for VA mortgages. VA loans can only be used on houses that will be occupied by the veteran. The Department of Veterans Affairs does not actually loan veterans money; veterans can get VA loans from participating lending institutions, and the Department of Veterans Affairs backs the loans for security.
Purpose
The original purpose of VA mortgage loans was to create a more affordable way for veterans who have served America to buy homes. In the past, veterans sometimes had a difficult time buying a home with a conventional loan because of the large down payment required. By helping them obtain affordable housing, the VA home mortgage loan program is one way that the government shows appreciation to servicemen and women.
Qualifications
According to the Department of Veterans Affairs, in order to qualify for a VA mortgage loan, you must have served in active duty in either wartime or peacetime service. Those who served in wartime service for at least 90 days and were not dishonorably discharged qualify for VA loans. Those who served at least 181 days of continuous peacetime service and were not dishonorably discharged qualify for VA loans.
Process
To obtain a VA loan, the Department of Veterans Affairs states that veterans must first apply for a VA loan through a mortgage lender that participates in the VA home loan program. Next veterans need to receive a Certificate of Eligibility from the Department of Veterans Affairs to prove to the lender that they are eligible to get a VA loan. Veterans can apply for a Certificate of Eligibility by completing VA form 26-1180, downloadable from the Department of Veterans Affairs website. After the individual is qualified the house must also be qualified. Once the Certificate of Reasonable Value (CRV) is issued proving the house's value, the loan process takes anywhere from two to six weeks on average, states BankRate.com.
Benefits
According to BankRate.com, VA loans do not require a down payment, like conventional and FHA loans do. The government also limits the fees charged in closing costs, origination fees and appraisal fees regarding VA loans. Lenders are also prohibited from charging private mortgage insurance on VA loans, which saves the veteran a lot of money when compared to conventional loans.
Downside
One downside to VA loans is that the recipients of VA loans have to pay loan funding fees. According to BankRate.com, Congress created a VA loan funding fee in 1982, which ranges from 1 ¼ to three percent of the loan amount, which the veteran must pay in order to receive the loan. VA loans also have limits. For instance, the maximum loan amount guaranteed by the Department of Veterans Affairs is approximately $240,000, so if a veteran wants to buy a more expensive house, he may have to get additional funding to help pay off the rest.
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