Finding your benefits with a VA Loan

This is a guest post from Adam Gibson, author of Accrued Interest, a popular financial world blog. Check out Accrued Interest for the latest on the bond market, treasuries, mortgages and other financial news.

With World War II still raging, the U.S. government created a unique home lending program to help spur home ownership among those who served our country.

Almost 70 years later, the VA Loan Guaranty program stands as the most flexible and powerful loan option on the market for most military borrowers. It also remains a small yet important way to give back to those who have proudly served our country.

For decades, VA loans have helped to level the playing field for veterans, who at times have found it difficult to build solid financial profiles because of constant relocation and the demands of military life. The Veterans Affairs department guarantees a portion of every VA loan, which helps VA mortgage lenders provide excellent rates and loan terms to qualified borrowers.

For decades, VA loans have helped to level the playing field for veterans, who at times have found it difficult to build solid financial profiles because of constant relocation and the demands of military life. The Veterans Affairs department guarantees a portion of every VA loan, which helps VA mortgage lenders provide excellent rates and loan terms to qualified borrowers.

VA Loan Benefits

VA loans also feature some significant financial benefits. The most important is that borrowers in most parts of the country can purchase a home worth up to $417,000 with no money down. Only one other loan program still allows borrowers to buy with no down payment. Veterans routinely cite this as the program’s most significant benefit.

But other key ones include:

• No private monthly mortgage insurance, which is a mandatory cost for conventional loans unless the borrower puts down at least 20 percent
• Sellers can pay up to 6 percent of closing costs and concessions
• Higher allowable debt-to-income ratios than conventional loans
• Consistently lower rates than conventional loans
• No penalties for prepaying the loan

VA loans are also easier to qualify for than most conventional loans. About 80 percent of VA borrowers couldn’t have obtained a conventional loan. Despite their less stringent requirements, VA loans also have the lowest foreclosure rate of any major lending option available.

Qualifying for a VA Loan

Not everyone who is eligible for a VA loan will ultimately be able to land one, but a huge number of veteran and active-duty military meet the initial requirements. Basically, you might be able to obtain a VA loan if you fall into one of these three categories:

• Military members who have served 181 days on active duty or three months during war time may be eligible.
• People who have spent at least a half-dozen years in the National Guard or Reserves
• Spouses of those killed in the line of duty

Veterans and active-duty service members who fall into those categories will need to obtain a Certificate of Eligibility from the VA. This formal military document attests to the borrower’s ability to participate in the program and indicates they have the necessary VA entitlement. Veterans can download a Request for Certificate of Eligibility online or get one through a trusted VA lender.

Tagged as: homes, loans