Why a VA Loan?
Why a VA Loan?
The more you know about our home loan program, the more you will realize how little "red tape" there really is in getting a VA loan. These loans are often made without any down payment at all, and frequently offer lower interest rates than ordinarily available with other kinds of loans. Aside from the veteran's certificate of eligibility and the VA-assigned appraisal, the application process is not much different than any other type of mortgage loan. And if the lender is approved for automatic processing, as more and more lenders are now, a buyer's loan can be processed and closed by the lender without waiting for VA's approval of the credit application.
Additionally, if the lender is approved under VA's Lender Appraisal Processing Program (LAPP), the lender may review the appraisal completed by a VA-assigned appraiser and close the loan on the basis of that review. The LAPP process can further speed the time to loan closing.
Five Easy Steps to a VA Loan
Apply for a Certificate of Eligibility.
A veteran who doesn't have a certificate can obtain one easily by making application on VA Form 26-1880, Request for Determination of Eligibility and Available Loan Guaranty Entitlement, to the local VA office.
- Decide on a home the buyer wants to buy and sign a purchase agreement.
Order an appraisal from VA. (Usually this is done by the lender.)
Most VA regional offices offer a "speed-up" telephone appraisal system. Call the local VA office for details.
Apply to a mortgage lender for the loan.
While the appraisal is being done, the lender (Mortgage Company, savings and loan, bank, etc.) can be gathering credit and income information. If the lender is authorized by VA to do automatic processing, upon receipt of the VA or LAPP appraised value determination, the loan can be approved and closed without waiting for VA's review of the credit application. For loans that must first be approved by VA, the lender will send the application to the local VA office, which will notify the lender of its decision.
- Close the loan and the buyer moves in.
VA Financing - a Good Deal for Veterans
More than 29 million veterans and service personnel are eligible for VA financing. Even though many veterans have already used their loan benefits, it may be possible for them to buy homes again with VA financing using remaining or restored loan entitlement.
Before arranging for a new mortgage to finance a home purchase, veterans should consider some of the advantages of VA home loans
1. Most important consideration, no down payment is required in most cases.
2. Loan maximum may be up to 100 percent of the VA-established reasonable value of the property. Due to secondary market requirements, however, loans generally may not exceed $203,000.
3. Flexibility of negotiating interest rates with the lender.
4. No monthly mortgage insurance premium to pay.
5. Limitation on buyer's closing costs.
6. An appraisal which informs the buyer of property value.
7. Thirty year loans with a choice of repayment plans:
a. Traditional fixed payment (constant principal and interest; increases or decreases may be expected in property taxes and homeowner's insurance coverage);
b. Graduated Payment Mortgage--GPM (low initial payments which gradually rise to a level payment starting in the sixth year); and
c. In some areas, Growing Equity Mortgages-GEMs (gradually increasing payments with all of the increase applied to principal, resulting in an early payoff of the loan).
8. For most loans for new houses, construction is inspected at appropriate stages to ensure compliance with the approved plans, and a 1-year warranty is required from the builder that the house is built in conformity with the approved plans and specifications. In those cases where the builder provides an acceptable 10-year warranty plan, only a final inspection may be required.
9. An assumable mortgage, subject to VA approval of the assumer's credit.
10. Right to prepay loan without penalty.
11. VA performs personal loan servicing and offers financial counseling to help veterans avoid losing their homes during temporary financial difficulties.