What Is a Veteran Administration Loan?

home loans for veterans

As the name clearly states, a Veteran Administration home loan—now commonly referred to as a Veterans Affairs (VA) loan—is a loan granted only to select spouses of military members, and of course, military members themselves; whether active or not. To summarise, there are about four qualifying factors, and only one from the four should apply for an applicant to make the cut:

  • A borrower must have served 90 successive days or active service over wartime.
  • A borrower must have delivered 181 days of operating service over peacetime.
  • A borrower must have more than six years of rendered service in the National Guard or Reserves.
  • A borrower must be a spouse of a military personnel who has died over war or has died as an outcome of a service-caused disability.

VA Homeloan Requirements

What makes this home loan program such a beauty, compared to other loans in the market, is that it demands no downpayment at all—completely nothing—to its qualified borrowers. Started in the year 1944, VA loans were conceived to enable members of the armed forces to purchase homes by eliminating such a challenging task of coming up with a high credit score. The U.S. Department of Veterans Affairs (USDVA) demands no particular FICO score whatsoever to any of its borrowers. Interestingly, the loanees under the VA will still have to prove that they can pay for these loans, so being able to present promising credit is still a substantial bonus.  

How a VA Mortgage Works

The money will not be coming from the VA, but from private lending companies, the applicants choose to work with (or vice versa). Technically, the VA only serves as guarantors to its loanees should they default. By doing so, they become the “bailsmen” in the equation, protecting these banks and private lenders and lessening the risk involved in funding an applicant’s journey to buying a house. Other perks to this home loan program include not having to pay for the closing cost right away and being able to have the loan assumed by an able party. What’s more, VA loans are also arguably one of the very few loan programs that offer incredibly low-interest rates. Still, qualified debtors are not entirely exempted from having to pay certain fees.

A regular fee that veterans have to keep paying for is a VA funding fee. How much this is also determined by how one can make the grade on the loan in the first place. That said, select spouses will not have the same VA funding fee compared to other borrowers who made the cut via another category. However, any qualified applicant who now goes through life with a severe disability caused by wartime service is exempted from this payment.

Just like many loans, the limits to a VA loan majorly depends on where a borrower chooses to purchase an abode. Many veterans get to buy a house in the $400,000 scale, but houses bought in counties labeled as expensive can buy a house in the $600,000 standing. For more details and a specific computation on Texas Veterans home loans, click the link.

By: Lorenza