WHAT IS A VA GUARANTEED LOAN?
*VA guaranteed loans are made by private lenders, such as banks, credit unions, or mortgage companies to eligible
veterans for the purchase of a home, which must be for their own personal occupancy. Veterans apply for a loan
through a lender and if the loan is approved, VA guarantees a portion of the total loan amount. VA's guarantee allows
the veteran to obtain a competitive interest rate without having to make a downpayment. The amount of a loan a
veteran can be approved for depends on the property location and entitlement available, as well as credit and income
factors.
VA LOANS OFFER THE FOLLOWING IMPORTANT FEATURES:
*Equal opportunity for all qualified veterans to obtain a VA loan.
*No downpayment (unless required by the lender or the purchase price is more than the reasonable value of the
property).
*Buyer informed of reasonable value.
*Negotiable interest rate.
*Ability to finance the VA funding fee (plus reduced funding fees with a downpayment of at least 5% and exemption
for veterans receiving VA disability compensation).
*Closing costs are comparable with other financing types (and may be lower).
*No mortgage insurance premiums.
*An assumable mortgage.
*Right to prepay without penalty.
*For homes inspected by VA during construction, a warranty from builder and assistance from VA to obtain
cooperation of builder.
*VA assistance to veteran borrowers in default due to temporary financial difficulty.
VA DOES NOT DO THE FOLLOWING:
*Guarantee that a home is free of defects. VA guarantees only the loan. It is the veteran's responsibility to assure
that he/she is satisfied with the property being purchased. The *VA appraisal is not intended to be an "inspection" of
the property. A veteran should seek expert advice (a qualified residential inspection service), as necessary,
*BEFORE legally committing to a purchase agreement.
*If you have a home built, VA cannot compel the builder to correct construction defects although VA does have the
authority to suspend a builder from further participation in the home loan program.
*VA cannot guarantee that a veteran is making a good investment.
*VA cannot provide a veteran with legal services.
HOW DOES A VETERAN OBTAIN A VA GUARANTEED LOAN?
*Contract to purchase: Veteran selects home and discusses purchase with seller or selling agent and signs
purchase contract conditioned on approval of a VA guaranteed loan.
*Loan application: Veteran selects lender, presents Certificate of Eligibility, and completes loan application. Lender
will develop all credit information and request VA to assign a licensed appraiser to determine the reasonable value
for the property. Veteran will pay for credit report and appraisal unless the seller agrees to pay. Either VA or the
lender will issue a value for property for loan purposes based on the appraisal.
*Loan decision: If the established value is acceptable to all parties and the lender develops that a veteran is credit
and income qualified, the loan may be approved. Most lenders are authorized to make this decision.
*Loan closing: Veteran (and spouse) attend the loan closing and sign the note, mortgage, and other related papers.
*The lender or closing attorney will explain the loan terms and requirements as well as where and how to make the
monthly payments. When the loans reported to VA, the *Certificate of Eligibility is annotated to reflect the use of
entitlement and returned to the applicant. (The loan closing procedure may vary in some states.)
FREQUENTLY ASKED QUESTIONS
I Now Have My COE, What Do I Do Next?
*Loan Program. The figure merely provides evidence to your lender that you have full VA entitlement.
With this entitlement and underwriter approval, you can obtain a loan in an amount up to $417,000;
some high cost counties have even higher limits.
What is the VA Interest Rate?
*VA does not establish interest rates or closing costs for VA loans. Rates are negotiable between you
and your lender. It is advisable to obtain quotes from at least three different lenders.
What is the Minimum Credit Score Required for a VA loan?
*VA has no minimum credit score requirement. However, the lender you choose to do business with
may have such a requirement.
What Types of Property Does My COE Cover?
*The VA Home Loan program guarantees loans for real property that is to be used by the veteran as
a primary residence. The program does not cover vacation homes, vacant land, multiplexes in
excess of four units, motor homes, small business loans, or commercial buildings.
Can I Use My VA Entitlement to Refinance?
*Yes. You can refinance any type of loan on your property using your VA entitlement.
