The Basics of the VA Home Loan Program
The GI Bill of Rights that was passed in 1944, thanks to Franklin D. Roosevelt, was packed full of goodies for veterans and service members, ranging from education benefits to assistance in obtaining home loans, which is now known as the VA Home Loan Program. The program allows veterans and service members to obtain a federally guaranteed home without a down payment.
The program, as with any other government entity, comes with its own set of rules and requirements – in this case mostly pertaining to eligibility. Veterans, active duty, guard or reserve, and military spouses must first apply for and obtain a Certificate of Eligibility through the Veterans Administration. This certificate does not guarantee loan approval, but instead allows those who are eligible to apply for a VA home loan. Veterans eligible for the program must have served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continuous days during peacetime. There are additional requirements concerning the number of years in service that can be obtained through the Veterans Affairs Department.
The loans, which are made through private lenders, will be guaranteed by the VA for a maximum of 25 percent of a home loan amount up to $104,250, which limits the maximum loan amount to $417,000. Borrowers are able to borrow the reasonable value of the property or the purchase price, whichever is less, as well as the funding fee.
The loans also come with occupancy requirements to ensure the homes will be used as a “primary residence.” Potential homeowners have to prove they will use the residence they are purchasing within a “reasonable time,” which is typically two months following closing on the loan or when the house is finished for custom built properties. There are extensions available, but delays beyond a year are typically not considered reasonable by the agency. The department does allow spouses to occupy the property in place of a borrower. Additionally, there are ongoing occupancy requirements, which may impact those who travel frequently or spend long periods of time away from home as well as those who may be up for deployments and permanent change of station orders.
VA Home Loan Facts & Information
- VA loan limits may change in 2012 due to the expiration of higher limits.
- A specific loan amount for approval is not guaranteed with a VA loan.
- There are a number of factors that determines a VA loan limit.
- The VA can only issue a guarantee to make a loan safer for the lender, it cannot force the lender to issue credit.
- Requesting pre-approval for a VA loan allows the borrower to know how much credit he or she can get approved for.
- In some cases, loan limts on VA loans are higher in areas where the housing market is more valuable.
- VA loan limits are only applicable on approved properties and for loan purposes.
- VA loans are, in addition, approved for the simultaneous acquisition of land where the home is to be built.
These loans are not for every veteran or service member, given that they come with plenty of restrictions, but they can provide potential homeowners the chance to purchase without a down payment and the need for private mortgage insurance, a condition of conventional mortgages.
Maya Szydlowski is a Web Reporter for VAMortgageCenter.com, the nation’s leading VA loan provider.