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