An entire group affiliated with the US military is likely eligible for a Veterans Administration (VA) loan. This type of loan makes borrowing for a home easy in several ways. Read on and learn more about VA loans.
Who is Eligible?
Both active and retired US military from any branch and their surviving spouses can get a VA loan guarantee. Certain civilian personnel may also be eligible. Those applying must have served for a minimum number of months in the military and they must present proof of their (or their spouse's) service. Contact the VA to learn more about the loan program eligibility standards.
What is a Loan Guarantee?
The VA offers a loan guarantee program for veterans. However, the mortgage loan itself comes from a lending institution and not the VA. The VA guarantees the loan in respect to covering the loss for the lender if the loan defaults. Usually, the lender will lose money on a loan if the homeowner fails to make payments. The home may enter foreclosure proceedings and the home is taken from the owners.
With a VA loan guarantee, however, the lender is guaranteed to be paid for the loan no matter what happens with the homeowner. Loan guarantee programs like this from the VA provide a comforting layer of protection for lenders and that can make them far more likely to lend money to buyers. There are no guarantees that the loan will be approved by the lender, however. The buyer still needs to show that they are financially stable and earn enough money to qualify for the loan.
Some Big VA Loan Benefits
One thing that attracts applicants to VA loans is that there are no requirements for a down payment. It's very difficult to find any type of loan situation in which a down payment is not an issue. In addition to that huge perk, buyers can also expect to pay less in closing costs for the loan since the VA limits those costs.
With other types of no-down payment loan programs, such as the one offered by the Federal Housing Administration (FHA), mortgage insurance may be required. That can add a large cost to the monthly housing expense. The VA, though, does not require private mortgage insurance (PMI) on their loans. Mortgages guaranteed by the VA are also likely to be offered at lower interest rates than many other types of loans.
If you are a veteran and it's time to buy a home, speak to a mortgage broker who deals in VA loans.