Federal VA home loan program
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VA Guranteed loans program is a Federal VA home loan program that allows eligible veterans to obtain financing to purchase their home. |
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It can be a single family residence or a multi-family upto four units as far as the veteran occupy one of the unit. |
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The program is guaranteed by the Department of Veteran Affairs but the loan is made by the institutional lenders. |
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To be eligible for VA loan the Veteran needs a" Certificate of Eligibility". The eligibility depends on the active service time which is 90 days in wartime |
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or 24 months during peacetime. |
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VA loans have some unique features like no downpayment necessary .That means Veterans can get full loan amount without paying any downpayment. |
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The loan amount can be the sales price or appraised value, whichever is less. The no downpayment feature helps those veterans |
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to buy home who were not able to do before. |
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Though downpayment is not necessary but the borrower may make a downpayment if they have any funds available or if the borrowed loan amount is less than the |
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purchase price. |
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The downpayment can also be obtained with secondary financing. |
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Underwriting Standards for VA loans are less stringent as compared to conventional loans. |
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The underwriting standards are established by Department of Veteran affairs. |
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VA loans has no income limits. That means these loans are not limited to low,middle or high income. |
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VA loans are fully amortized loans upto 30 years. |
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There is 1% orination fee , the lender might charge some discount points which is paid at the time of closing either by the borrower,seller or a third party. |
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The interest rates for VA loan are negotiable between the borrower and the lender. |
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VA loans doesn't charge any Prepayment penalty if the borrower wants to payoff early or pay some additioal principal. |
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VA loans doesn't require any mortgage insurance but there might be a funding fee which is a percentage of the loan amount. |
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VA Funding fee is a set fee applied to all VA new loan or refinance program. |
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The funding fee depends on the factors like downpayment. The proceeds of the fee goes to the VA and help cover losses for default loans. |
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But the VA funding fee is waived for veterans with service related disabilities. |
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VA loan is guaranteed by the Federal goverenment.It is similar to private mortgage insurance that covers only some amount of loan but not full. |
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VA guarantees maximum of 25% of loan amount for loan over $144,000 . |
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VA borrowers are qualified under two methods: |
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Income to debt ratio and residual income method. |
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The VA borrower income to debt ratio should be 41% or less in order to get qualified for the loan. |
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The residual income methods determines whether the borrower has enough cash left for other expenses after paying mortgage and other mothly expenses. |