VA Loan is a loan that is guaranteed by the U.S. Department of Veterans Affairs. It was created when President Franklin D. Roosevelt signed the GI Bill of Rights. These loans were started with the idea of fulfilling the dreams of U.S war veterans to own a home after World War 2.
VA Loans can be obtained by U.S. Army, Navy or Air Force war veterans from financial institutions, either banks or credit unions that specifically provide this form of loan
VA Loan Features
- As someone applying for a VA Loan, you need to be aware of its features:
- You can buy a house through a VA Loan for residential purpose and not for renting.
- You have to prove your eligibility to get his loan
- You can buy a housing unit in a project that has a VA Loan approval with this Loan.
- In the event that you cannot make payments for the loan in the future, the government will pay the lender.
- You have to pay one percent lender charges and some discount points.
Types
There are many types of VA Loans. Here is a look at what these are:
1. VA home loan – This is applied when you have to buy a new home
2. VA loan for refinance – This is applied when you want to settle real estate debt payments
3. VA construction loans – This is applied for new constructions
4. VA streamline refinance – This is applied when you want to lower interest rates on loans
5. VA adjustable rate – This is applied when you want to buy homes with lower monthly loan payments. There is a fixed rate of interest that applied for the first few years and then an adjustable interest rate applies. These are no longer available.
Advantages
There are many advantages in taking a VA Loan. The first advantage is that the loan is guaranteed by the federal government and hence there is no need for a down payment. There is also no need to take any private insurance. There are many types of VA Loans available and you can choose one depending on your specific financial requirements.
Eligibility
Those who can fulfil the eligibility criteria alone can opt for a VA Loan. Here is a look at what these are:
a) You must be a veteran who has served on active duty in the Navy, Army, Marine Corps, Air Force, or Coast Guard and you must have been discharged with honour. During your time with the army, you must have served for at least 90 days during wars and 181 non-stop days during peace.
b) If you served as a national guard, then you must have been in this position for at least six years to qualify for a VA Loan.
c) If you were in the selected reserve, you must have served for more than six years here to qualify for a VA Loan.
d) In case you ha undergone a foreclosure, aperiod of two years must have elapsed before you can apply for this loan.
These are some of the criteria applicable. You can also apply for a VA Loan if you worked as an Officer of National Oceanic and Atmospheric Administration, member of Public Health Service officers, or cadets at service academies. Those who served for American allies during World War II are also considered eligible. If you have has a stable employment history, some military benefits, cleared your federal debts and so on, you are also considered eligible for such a loan.
What documents are needed to get VA Loans?
If you wish to get a VA Loan, you need to get ready documents such as a VA Form 26-1880, which is a Request for a Certificate of Eligibility, DD-214 papers which are means your ‘discharge papers’, bank account details, details on any loans you have taken, addresses of the places that you have lived for the past two years and details of any assets that you have.
These documents are necessary to prove your eligibility for a VA Loan.
What is the assured amount in VA Loans?
When you take a VA Loan, you are assured to get 25% of the home loan, when the loan amount required is lesser than $104,250. You will also get the funding charges for the loan as well as the purchase price and the money the property is worth (whichever is lesser).
What Costs are incurred in Getting a VA Loan
Costs associated with a VA Loan include funding fees, credit report payment, insurance, some tax, assessment fees and taxes for the recording process.
Disadvantages
As someone interested in getting a VA Loan, it is important that you make arrangements to cover closing costs because these are not covered by this loan. There is also the problem that the home you get might not really be the best.
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