VA Loans: What are they? Who is eligible? What are the advantages?
What are VA loans?
Veterans Affairs (VA) home loans are mortgages that are guaranteed by the U.S. Department of Veterans Affairs. VA loans became available in 1944 as part of the Serviceman’s Readjustment act, also known as the GI Bill. Qualifying veterans have the opportunity to purchase a home without putting any money down, through the VA home loan program. Borrowers must obtain a VA Loan through a participating private lenders. The VA doesn’t loan any money; they insure a portion of the mortgage which allows lenders to offer more favorable rates and terms to veterans who qualify.
Who is Eligible for a VA Loan?
Veterans, active-duty personnel, members of the National Guard and Reserves, and eligible surviving spouses may qualify for VA home loans. Eligibility is based on length and type of military service and discharge conditions. In order to apply for a VA loan, borrowers will need to obtain a Certificate of Eligibility (COE) through the Veterans Administration. While the COE allows an eligible individual to apply for a VA loan, it does not guarantee loan approval. More information on how to apply for a COE and eligibility requirements can be found here: http://benefits.va.gov/HOMELOANS/purchaseco_eligibility.asp.
What are the Advantages of a VA Loan?
Some of the advantages of a VA home loan include:
- No down payment – Borrowers can finance up to 100% of the purchase or appraised value, whichever is less
- No private mortgage insurance (PMI) – VA borrowers don’t have to pay PMI because the loan is backed by the federal government
- Competitive interest rates –Lenders are often able to offer lower interest rates on VA loans
- Easier to qualify for – VA loans have more favorable income, debt and credit qualifications
- Lower closing costs – The VA limits what fees and costs veterans can pay at the time of closing
- Its’ not a one-time benefit – there are no limitations on how many times a veteran can use the home loan program