The United States Department of Veterans Affairs provides a loan guarantee service to honorably discharged veterans of the United States military. Essentially, any serviceman or their surviving spouse is eligible for 100% financing without a down payment or mortgage insurance or 90% refinancing on an existing home.
How exactly does a VA loan work?
The VA loan isn’t issued by Veterans Affairs. Instead, the loans are issued by private lenders like banks and mortgage companies, but insured by VA. This means that if you default on your loan, Veterans Affairs will guarantee or secure it. This often translates to lower down payment requirements and eligible interest rates.
What else does the VA loan program do?
The Veterans Affairs loan program also provides pre-purchase counseling. VA officers will sit down with you and your families and go through the process of purchasing and owning a home, obtaining financing and basically understanding the home ownership process.
Does entitlement to a VA loan guarantee a mortgage?
Unfortunately, no it doesn’t. Veterans Affairs can’t force a lender to issue you a home loan, but it can help to make you a more attractive recipient. You still must meet basic credit and income requirements. But if a lender is concerned, for example, about a veteran’s poor credit history, the loan can still be denied or offered at a higher interest rate.
How much are veterans entitled to under the VA loans program?
The bare-bones, basic entitlement is $36,000, but this varies depending on region, median home prices and the amount required. While the amount changes yearly, the limit for the continental U.S. in 2008 was $417,000. Consequently, a qualified veteran could obtain a no down-payment mortgage for an amount up to $417,000.
What do I need to get a VA loan?
You need a Certificate of Eligibility. You can get one either from your lender or the Department of Veterans Affairs. Most recent veterans’ information is stored in an online database known as ACE (Automated Certificate of Eligibility), so lenders can access this database to find out if a borrower has a certificate.
How do I get a VA loan?
First you need to select a home and sign a purchase contract that’s dependant on you receiving a VA home loan. Next, you should choose a lender and complete a loan application with your Certificate of Eligibility. The lender will then contact Veterans Affairs to assign an appraiser to determine the market value of the home.
Once a Certificate of Reasonable Value has been issued on the home, your lender will let you know that you’ve been approved for your loan. At that time, you’ll attend the closing where the lender or its attorney will explain the terms of the loan to you, and you will sign the loan agreement.
After the signing, the loan is sent to Veterans Affairs for guaranty, at which point your Certificate of Entitlement is annotated and sent back to you. Finally, once all appropriate approval has taken place and paperwork is signed, you move in.
By: Ben Horne
Posts Tagged ‘Veterans Administration’
How Veterans Administration Loans (VA Loans) Work
March 14th, 2010How Do I Invest In Veteran Administration Foreclosures?
March 7th, 2010
The Veterans Administration (VA) was established for the purpose of providing men and women who have served in the armed forces with various benefits. They provide many federal benefits such as health care, burial benefits, financial benefits and home loan assistance.
They have been helping veterans purchase homes since 1944. It is available to veterans, active duty personnel, and some members of the National Guard and the Army Reserve.
The VA provides lending institutions with guarantees that loans made to veterans will be re-paid in full in the event of a default. These loans are available to veterans for primary residence dwellings. It is the law that a borrower live in in the property purchased.
A benefit of a VA backed loan is that no down payment is required. Statistics tell us that these loans are more problematic than regular loans. A veteran can have declared bankruptcy at least two years ago and still get a loan without problems.
Benefits of a VA loan:
No down payment required.
Competitive interest rates are offered
VA fees and closing costs can be financed.
VA loans can be assumed.
No mortgage insurance premiums.
No mortgage pre-payment penalties.
Assistance is available to those in default.
There is not a lot of reading material available concerning VA loans so opportunities are there for the taking.
The VA has awarded a contact to Ocwen Federal Bank to manage all VA foreclosures. This company is located in Orlando, Florida and offers those properties through the us of real estate office across the country. There is a web site, ocwen.com which has a list of national foreclosures. There is a breakdown within the state listing for cities.
You can find a list of agents handling those properties on the web site along with important information concerning the property. Contact the indicated agent and arrange a visit to the property.
As the VA has guaranteed the loan when it is foreclosed and taken back it winds up on the VA list. Due to the fact that the original buyer had very little invested in the property the VA often finds itself selling for a discounted price. Houses can often be bought for 70-80% off the asking price.
Due to the previous homeowners financial condition the condition may vary widely. Have any property you are interested in examined by a licensed Home Inspector.
Ocwen Federal Bank has a special financing program available called VA Vendee Financing Program and is available both to veterans and non veterans. The most important fact is that you don’t have to occupy the property you are buying.
Benefits of the Vendee Financing Program:
No down payment for owner occupants.
A low down payment of 5% for non occupants.
Competitive interest rates.
No mortgage insurance required.
No appraisal fees.
No flood certification.
This is a largely untapped area for new investors. Do your homework and seek the advice of professionals.
By: Ray Caran
