How VA Loans Work and How to Get One

How VA Loans Work, and How to Get One

The VA’s home loan program, for which millions of military veterans are eligible, gets participants into homes that they otherwise wouldn’t be able to purchase.

The program doesn’t offer the loan itself, rather, the Department of Veterans Affairs acts as an insurer, guaranteeing the loan should the homeowner default.

Who Qualifies

To qualify for a VA-backed loan, veterans need to get a certificate of eligibility proving they meet one of the following requirements:

§  Ninety consecutive days of service during wartime (as defined by the VA) or 181 days during peacetime.

§  National Guard member or reservist who served six years.

§  Wounded in service, even if they served less than the specified time.

§  Widows or widowers of those who died in action or from injuries suffered while on duty.

How It Works 

The VA backing allows buyers to purchase a home with no down payment and without having to buy private mortgage insurance.

Compare that to an FHA loan, another government-backed mortgage which can require as little as 3.5% down but can also require mortgage insurance premiums costing a couple hundred dollars a month in payments.

The program is self-funded through a fee paid when the loan is closed, a fee that can also be wrapped into loan payments, said Chris Birk, author of “The Book on VA Loans. Veterans disabled during their service can waive the fee.

More Requirements 

§  The VA has its own appraisal process.

§  Borrowers will need to meet VA and lender guidelines for credit score, debt-to-income ratio and other underwriting requirements.

§  No investment properties—there are residency requirements, although a spouse may be able to meet them.

§  The VA will want to check out the house being purchased. This isn’t a five-point inspection, Birk said, but a general check to make sure the porch doesn’t hide termites and the roof has a few solid years left. Basically, the VA wants to make sure the odds remain high that the house is safe and saleable

And a safeguard:

The VA also offers foreclosure help. They will negotiate with banks when things get troubled, Birk said. The VA has helped more than 320,000 veterans avoid foreclosure since 2008, saving $11 billion in claim payments, according to Veterans United. 

The specialists can help modify the loan, reduce payments or work some other kind of forbearance, Birk said.