Federal VA home loan program

VA Guranteed loans program is a Federal VA home loan program that allows eligible veterans to obtain financing to purchase their home.

It can be a single family residence or a multi-family upto four units as far as the veteran occupy one of the unit.

The program is guaranteed by the Department of Veteran Affairs but the loan is made by the institutional lenders.

To be eligible for VA loan the Veteran needs a" Certificate of Eligibility". The eligibility depends on the active service time which is 90 days in wartime

or 24 months during peacetime.

VA loans have some unique features like no downpayment necessary .That means Veterans can get full loan amount without paying any downpayment.

The loan amount can be the sales price or appraised value, whichever is less. The no downpayment feature helps those veterans

to buy home who were not able to do before.

Though downpayment is not necessary but the borrower may make a downpayment if they have any funds available or if the borrowed loan amount is less than the

purchase price.

The downpayment can also be obtained with secondary financing.

Underwriting Standards for VA loans are less stringent as compared to conventional loans.

The underwriting standards are established by Department of Veteran affairs.

VA loans has no income limits. That means these loans are not limited to low,middle or high income.

VA loans are fully amortized loans upto 30 years.

There is 1% orination fee , the lender might charge some discount points which is paid at the time of closing either by the borrower,seller or a third party.

The interest rates for VA loan are negotiable between the borrower and the lender.

VA loans doesn't charge any Prepayment penalty if the borrower wants to payoff early or pay some additioal principal.

VA loans doesn't require any mortgage insurance but there might be a funding fee which is a percentage of the loan amount.

VA Funding fee is a set fee applied to all VA new loan or refinance program.

The funding fee depends on the factors like downpayment. The proceeds of the fee goes to the VA and help cover losses for default loans.

But the VA funding fee is waived for veterans with service related disabilities.

VA loan is guaranteed by the Federal goverenment.It is similar to private mortgage insurance that covers only some amount of loan but not full.

VA guarantees maximum of 25% of loan amount for loan over $144,000 .

VA borrowers are qualified under two methods:

Income to debt ratio and residual income method.

The VA borrower income to debt ratio should be 41% or less in order to get qualified for the loan.

The residual income methods determines whether the borrower has enough cash left for other expenses after paying mortgage and other mothly expenses.