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Basic Guide to Using VA Loans

Basic guide to using VA loans
 
 

   Buying a home isnít just a single decision. There are countless decisions involved, starting with how youíll pay for a home. Before you figure this out, everything else is a moot point.

   Thereís no shortage of financing options, and the one you choose will have a huge impact on the cost of buying and owning a home. Once you better understand, the costs involved youíll have a better idea of whether or not youíre financially ready to buy a home.

   Some home loan options are available to just about everyone, while others are reserved for particular individuals that meet requirements. Specialty Flagship Financial Group notes that VA loans fall into the latter category. The VA loan program is only available to veterans, active service members and in some cases their spouses. If you qualify for a VA home loan, it can make purchasing a home much less expensive up front and over the long-term.

How Do VA Loans Work?

   The experts at Flagship Financial explain that VA loans are unique in that they are guaranteed by the Department of Veterans Affairs (VA). This means the VA protects lenders from loss, which makes lenders more willing to lower their lending requirements for a borrower.

   The VA loan program is a part of the Servicemenís Readjustment Act (G.I. Bill). It gives eligible veterans additional financing options and makes ownership possible for more people because a down payment is not required. Other benefits of using a VA loan include:

  • ∑  No private mortgage insurance payments.
     
  • ∑  Highly competitive, fixed mortgage rates.
     
  • ∑  Loans are assumable.
     
  • ∑  Forbearance during periods of financial hardship.
     
  • ∑  There are no prepayment penalties.
     
  • ∑  Lower income and credit standards than conventional loans.
     
  • ∑  Lower/limited loan closing costs.

   The standard loan limit that the VA will guarantee is $417 000. However, this can be increased in certain high-price markets like Hawaii and California. The amount is based on the Federal Housing Finance Agency (FHFA) annual conforming loan limit and whatís known as entitlement.

   Basic entitlement is given to every eligible veteran. It guarantees $36 000 of a home, and generally, lenders will give approval for four times this amount. The bonus entitlement can cover the remaining amount for loans over $144 000. Eligible veterans should be aware that this is typically a one-time benefit if you use the entire basic entitlement to qualify for a loan. The entitlement can be restored if the home is sold or the loan is paid in full.

   Keep in mind, you can qualify for a higher loan, but the VA will only guarantee it up to a certain amount. But before you can take advantage of a VA loan you have to make sure youíre eligible.

Who is Eligible to Participate in the VA Loan Program?

   Not everyone who has served in the military will be eligible for a VA loan. People who are potentially eligible include:

  • ∑  Any member of the Armed Forces thatís on current active duty in good standing.
     
  • ∑  Anyone who has served for 6+ years in the National Guard or Selected Reserve and was honorably discharged or retired.
     
  • ∑  Combat veterans who were on active duty service between 90 days and 24 months (time period depends on the qualifying wartime)
     
  • ∑  An unmarried spouse of a veteran who died or became disabled during service.
     
  • ∑  Spouse of a service member who went missing during action or is a prisoner of war.
     
  • ∑  Surviving spouse who remarried after the age of 57.

   If you are eligible, youíll have to receive a Certificate of Eligibility before you can apply for a VA loan. You can get the certificate by completing VA Form 26-1880.

   It should be noted that there are a few additional requirements to qualify for a VA loan. The borrower must intend to live in the home and have to be living there within 60 days of closing on the loan. The one exception is single service members who are on active duty. In these cases, the borrower has up to 12 months to occupy the home.

Where Can I Get a VA Loan?

   VA loans arenít actually made through the Department of Veterans Affairs. A VA loan can be obtained through a lender that has been approved by the VA to participate in the program.

   VA-approved lenders understand the requirements and process of handling a VA loan, which can be complicated at times. This helps make the approval process easier and quicker. Lenders who are approved by the VA also have the authority to accept VA loan applications and process the loan without any outside parties needing to be involved.

   Because of these factors, itís in your best interest to consider only VA-approved lenders if you want to use a VA loan.

 

 
Basic guide to using VA loans

Basic guide to using VA loans

Basic guide to using VA loans

Basic guide to using VA loans

Basic guide to using VA loans


 
Basic guide to using VA loans

Basic guide to using VA loans

Basic guide to using VA loans

Basic guide to using VA loans

Basic guide to using VA loans

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