How VA Loans Work, and How to Get One

How VA Loans Work, and How to Get One

The VA loan program isn’t quite like any other on the market. Yes, there’s a limited audience, but even limited, millions of people are eligible. And it can get a lot of people into their own homes that they otherwise wouldn’t be able to purchase. And there’s an extra hand should the mortgage payments prove too much.

Who qualifies: 

  • Those who served 90 consecutive days during wartime (as defined by the VA) or 181 days during peacetime
  • National guardsmen and women or reservists who served six years
  • Vets wounded in service, even if they served less than the specified time
  • Widows or widowers of those who died in action, or from injuries suffered while on duty

Veterans will need to get a certificate of eligibility proving they meet all the requirements.

How it works: 

The VA loan program doesn’t offer the mortgage itself. Instead, the Department of Veterans Affairs acts as an insurer, guaranteeing the loan should the homeowner default.

The VA backing allows buyers to purchase with no down-payment and without having to buy private mortgage insurance.

Compare that to FHA loans, another government-backed mortgage, which can require as little as 3.5 percent down — but also requires mortgage insurance premiums that could add up to a couple hundred dollars a month in payments.

The program is also self-funded, says Chris Birk, the author of The Book on VA Loans through a fee paid when the loan is closed, a fee that can also be wrapped into loan payments. Veterans disabled during their service can waive the fee. 

More requirements: 

  • The VA has its own appraisal process.
  • Borrowers will need to meet VA and lender guidelines for credit score, debt-to-income ratio and other underwriting requirements.
  • No investment properties — there are residency requirements, although a spouse maybe be able to meet them.
  • The VA will want to check out the house being purchased. This isn’t a 5-point inspection, Birk says, but a general check to make sure the porch doesn’t hide termites and the roof has a few solid years left. Basically, the VA wants to make sure the odds remain high that the house is safe and salable

And a safeguard:

The VA also offers foreclosure help. They’ll negotiate with banks when things get troubled, Birk says. The VA has helped more than 320,000 veterans avoid foreclosure since 2008, saving $11 billion in claim payments, according to Veterans United. 

The specialists can help modify the loan, reduce payments or work some other kind of forbearance, he says.

This article was originally published by Anne Miller on Realtor.com. To see the original article, click here.