RESOURCES

What Is A VA Loan?

A Veteran’s Administration (VA) loan is a Home Loan specifically for American Veteran’s or their surviving spouses (provided they have not remarried), insured by the U.S. Department of Veterans Affairs.

The VA’s mission statement is: “To help veterans and active duty personnel purchase and retain homes in recognition of their service to the Nation. All veterans and other participants in the program will be treated in a courteous, responsive, and timely manner. We will endeavor to operate in the most efficient manner possible to minimize costs and ensure the best use of the taxpayer's dollar.”

The original Servicemen's Readjustment Act, passed by the United States Congress in 1944, extended a wide variety of benefits to eligible veterans. The VA Home Loan program has been especially important to US veterans. Under the law, the Veterans Administration is authorized to guarantee or insure homes, farms, and business loans made to veterans by lending institutions.

    The basic guidelines for a VA loan include:
  • Loans may be used to purchase or refinance a primary residence only.
  • The home may be a residence for 1-4 families.
  • The VA loan allows veterans to finance up to 100% of the purchase price of their home without requiring private mortgage insurance.
  • A VA funding fee of up to 3.3% of the loan amount is charged and may be financed as part of their loan.
  • Sellers may contribute toward closing cost and pre-paids up to 4% of the sales price of the home.
  • A debt to income ratio of up to 41% may be allowed assuming other underwriting criteria are met. This will allow for a higher loan amount than with a Conventional or FHA Loan.
  • A veteran may refinance a VA loan for up to 90% of the appraised value.

While the VA does not make direct loans to the Veterans, it does guarantee lenders that if a veteran defaults on their mortgage, the VA will reimburse the lender for a portion of their expenses incurred to foreclose on that home. Over the history of the program, millions of VA home loans have been insured using this program.

The Veterans Administration, in association with the Service members' Civil Relief Act, also protects service members from financial problems with their home loans that might occur as a result of active duty commitments, by freezing their mortgage interest rates at 6%. As with all Home Loan programs though, please contact one of our Home Loan Specialists to review specific details and see how this program can fit your needs.