VA loans are for veterans backed by the Veterans Administration and are used to purchase a home. Many veterans who would otherwise not be able to buy a home can do so through this program. Eligibility is specific and those who qualify must have a Certificate of Eligibility from the Veterans Administration. There are both benefits and disadvantages to such mortgages, but it really depends on the veteran and their situation.
The Veterans Administration doesn't give out mortgages. They just run the program. Lenders work with the Veterans Administration to become approved partners in the program. The lenders give out funds, and the Veterans Administration will pay a percentage if the veteran happens to default on it. At the current percentage, the Veterans Administration will cover up to $36,000 for a $144,000 VA loan and up to $60,000 over $144,000.
Most people find the program to be beneficial. Typically, there are no prepayment penalties, and no down payment is required. VA loan interest rates are also considerably low. Though the process can be tedious, sometimes approval is faster than approval for conventional loans. Another benefit is there is no need for Private Mortgage Insurance (PMI) and closing costs can be completely covered by the seller.
These type of mortgages do have some setbacks. Sometimes VA loans take longer to process so lenders aren't always eager to process them. Also, not all lenders are VA approved so veterans' choices of lenders are limited compared to someone looking for a conventional loan. Another disadvantage is that the sales price of the home will probably be less negotiable because the seller will be asked to pay closing costs. Lastly, if the veteran defaults on the VA loan, the Veterans Administration will pay the lender, but most likely try to get the money back from the veteran.
Some veterans may find that the program is perfect for their situation. Many are left disabled or unable to work. This makes buying a home extremely difficult. With the VA loan program, veterans can own homes. The best source for information on these mortgages is the Veterans Administration website or someone at the local Veterans Administration office. They can explain if an applicant is eligible after they fill out a form. If the applicant is eligible, the administration will give potential lenders a Certificate of Eligibility. To find a lender, veterans may want to work with a mortgage broker or ask around to see which company is recommended. Above all, military and former military should pray about the decision to pursue VA loans. God will direct each step. "The counsel of the Lord standeth for ever, the thoughts of his heart to all generations". (Psalm 33:11)
