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>>> PROGRAMS >>> LOANS FOR VETERANS
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LOANS FOR VETERANS |
Veterans who plan to buy a home may be able to use the VA home loan guarantee program. This involves a promise by the federal government to the bank or lending institution that if the veteran fails to make his or her mortgage payments, the VA will pay a certain amount of money to the lender. You may find, however, that under certain conditions, lending institutions will be reluctant to arrange VA financing. VA guarantees part of the total loan, permitting the purchaser to obtain a mortgage with a competitive interest rate even without a down payment if the lender agrees. The amount of the VA guaranty available to an eligible veteran is called the entitlement, and may be considered the equivalent of a down payment by lenders. Up to $50,750 in entitlement may be available to veterans purchasing or constructing homes to be financed with a loan of more than $144,000 and to veterans who obtain an Interest Rate Reduction Refinancing Loan of more than $144,000. The amount of entitlement varies with the loan amount.
What is the maximum loan amount?
VA does not establish a maximum loan amount. No loan for the purchase of a home, however, may exceed the reasonable value of the property. A loan for the purpose of refinancing existing mortgage loans or other liens secured on a dwelling is generally limited to 90% of the appraised value of the dwelling. A loan to reduce the interest rate on an existing VA-guaranteed loan, however, can be made for an amount equal to the outstanding balance on the old loan plus closing costs, reasonable discount points, and energy efficient improvements. A loan for the purchase of a manufactured home or lot is limited to 95% of the amount that would be subject to finance charges. In addition to these limits, the VA funding fee and up to $6,000 in energy-efficient improvements may be included.
May this benefit be used more than once?
A veteran who previously obtained a VA loan can use the remaining entitlement for a second purchase. The amount of remaining entitlement is the difference between $36,000, or $50,750 for special loans, and the amount of entitlement used on prior loans. Veterans refinancing an existing VA loan with a new VA loan at a lower interest rate need not have any entitlement available for use.
The first step in obtaining a VA home loan is to obtain a Certificate of Eligibility Form 26-1880 Request For Determination of Eligibility and Available Loan Guaranty Entitlement. This form is used to request VA to determine eligibility for loan guaranty benefits, and the amount of entitlement available.
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