UNDERSTANDING THE VA LOAN


In 1944, President Franklin D. Roosevelt, via the Servicemens Readjustment Act, signed the GI Bill of Rights into law, to allow war veterans to obtain a government guaranteed home without having to pay a down payment. For years now, this program, called the VA Loan, has helped millions veterans and their families live comfortably in homes of their own.

What is a VA loan?

A VA loan is provided to veterans who wish to purchase a home, a condominium unit, or a townhouse (which fall under a VA-administered project) to personally occupy after her or she retires from service. Such loans are often obtained from private lenders like mortgage firms and banks. Through the federal guaranty, the lender does not need to require the veteran borrower to pay a down payment, as the government already offers this protection.

What are the advantages of a VA Loan?

As mentioned, veterans are freed from the need to shell out a down payment. Interest rates in VA loans are also relatively low, compared to traditional loan programs. After the veteran obtains the certificate of eligibility and VA-approved appraisal, it does not take long before the loan amount is made available. In short, there is very little of the annoying red tape involved with most government programs.

There is a catch, though. The veteran has to use the VA loan to buy or improve a home that he will occupy himself, or intend to live in at a future time. Which isnt too hard to do, really, because home ownership is really what the VA loan is for. Also, a VA loan may only be used for housing purposes and not for any other type of business or property (for instance, a farm).

Another good thing about a VA loan is that a veterans loan entitlement never expires. Service personnel may be eligible for the VA loan as long as he or she remains active. If the person is released or discharged from the service before he gets the chance to use his entitlement, a deliberation on the reasons for his departure follows.

How much is the federal guarantee on a VA loan?

The government guarantees up to 25% of the amount borrowed under the VA loan. Veterans can take a maximum of $359,868 under the VA loan in most American states, but those living in AK and HI may borrow up to as much as $539,475.

The loan may also be acquired by more than one veteran, but the government can guarantee only up to 40 per cent of the loan amount. The same condition applies to married couples, where both the husband and wife are eligible to obtain the loan. A non-veteran may also jointly borrow with a veteran, but the guarantee will only be based on the veterans share. Another limitation to the VA loan is that the veteran may only purchase a home that is within US territory. This means he cannot buy a house in a foreign country.

For more information on the VA loan, get in touch with the Department of Veterans Affairs. The Ocwen Federal Bank also has a list of VA-accredited properties being sold in the market today. Just log on to http://www.ocwen.com.