What is a VA Guaranteed Home Loan?
VA guaranteed loans are made by private lenders for the purchase or
refinance of a home which must be for their own personal occupancy. The
guaranty means the lender is protected against loss if the veteran
fails to repay the loan. The guaranty replaces the protection the
lender normally receives by requiring a down payment. This allows the
veteran to obtain favorable financing terms.
A veteran has basic entitlement of $36,000. (Multiply remaining
entitlement by 4 for maximum loan amount) For loans in excess of
$144,000 to purchase or construct/refinance a home, additional
entitlement up to an amount equal to 25 percent of the Freddie Mac
conforming loan limit for a single family home may be available. This
loan limit can change yearly. The conforming loan limit for 2008 is
$417,000. (full entitlement amount of $104,250) This means that
qualified veterans could get a no down payment purchase loan up to
$417,000.00 if they have enough entitlement. If the sales price is
higher, a down payment will be required. The amount of the down
payment will depend on the remaining entitlement and the sales
price/value of the home. (currently VA loans are limited to a maximum
total loan of $1,000,000.00 plus funding fee)
The veteran has already obtained one VA loan. Can they get
Yes, eligibility is reusable depending on the circumstances. Normally,
if they have paid off their prior VA loan and disposed of the property,
they can have their used eligibility restored for additional use. Also,
on a one-time only basis, they may have their eligibility restored if
their prior VA loan has been paid in full but they still own the
property. In either case, to obtain restoration of eligibility, the
veteran must complete VA Form 26-1880 and we will be able to submit the
forms to VA for restoration. To prevent delays in processing, it is
also advisable to include evidence that the prior loan has been paid in
full and, if applicable, the property disposed of. This evidence can be
in the form of a paid-in-full statement from the former lender, or a
copy of the HUD-1 settlement statement completed in connection with a
sale of the property or refinance of the prior loan. With the increase
in entitlement for loans over $144,000.00, even Veterans that have used
entitlement in the past, may be able to obtain a new loan with no
What can VA not do?
VA can not guarantee that a home is free of defects. VA guarantees only
the loan. It is the veteran’s responsibility to assure that they are
satisfied with the property being purchased. The VA appraisal is not
intended to be an "inspection" of the property. The veteran should seek
expert advice (a qualified residential inspection service), as
necessary, BEFORE legally committing to a purchase agreement.
If they have a home built, VA cannot compel the builder to correct
construction defects although VA does have the authority to suspend a
builder from further participation in the home loan program.
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VA cannot guarantee a veteran that they are making a good investment.
VA cannot provide them with legal services.
What are the benefits of a VA home loan?
There are many benefits of a VA Home loan:
No down payment (unless required by the lender for reasons of
inadequate entitlement or the purchase price is more than the
reasonable value of the property).
Buyer informed of reasonable value.
Negotiable interest rate.
Ability to finance the VA funding fee (plus reduced funding fees
with a down payment of at least 5% and exemption for veterans
receiving VA compensation).
Closing costs are comparable with other financing types (and may
No mortgage insurance premiums.
An assumable mortgage.
Right to prepay without penalty.
For homes inspected by VA during construction, a warranty from
builder and assistance from VA to obtain cooperation of builder.
VA assistance to veteran borrowers in default due to temporary
What a buyer can afford depends on their income, credit rating, current
monthly expenses, down payment and the interest rate. The information
below can help, but it is best to have your customer visit with Valerie
(659-4949) to determine the best loan for their circumstance.
VA Income Requirements
The guidelines state that a borrower can allow up to 41% of their
verifiable income for a house payment and other monthly payments. VA
also looks at the family size and requires that a certain amount of
money be left after payment of bills and other monthly expenses. With
compensating factors, historically, higher ratios are allowed.
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VA Funding Fee
h. Funding Fee Purchase And Construction Loans
Note: The funding fee for ALL subsequent use loans closed on or after
October 1, 2006, and before October 1, 2007, is 3.35 percent. This applies
to all purchase loans where no downpayment of 5 percent or more is made
as well as cash-out refinances where the fee would have been 3.3 percent.
Effective October 1, 2007, the subsequent use fee reverts back to 3.3
Type of Down Payment Percentage Percentage for
Veteran for First Subsequent
Time Use Use
Regular None 2.15% 3.3% *
Military 5% or more (up to 10%) 1.50% 1.50%
10% or more 1.25% 1.25%
Reserves/ None 2.4% 3.3% *
National Guard 5% or more (up to 10%) 1.75% 1.75%
10% or more 1.5% 1.5%
Cash-Out Refinancing Loans
Type of Veteran Percentage for First Percentage for
Time Use Subsequent Use
Regular Military 2.15% 3.3% *
Reserves/National Guard 2.4% 3.3% *
*The higher subsequent use fee does not apply to these types of loans if the
veteran’s only prior use of entitlement was for a manufactured home loan.
Type of Loan Percentage for Either Type of Veteran
Whether First Time or Subsequent Use
Interest Rate Reduction
Refinancing Loans .50%
Manufactured Home Loans 1.00%
(NOT permanently affixed)
Loan Assumptions .50%
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