For veterans and active duty military personnel, a VA loan can be the most flexible home financing option available. Zero down payments, no private mortgage insurance, relaxed qualifying standards, and low interest rates are some of the benefits enjoyed by VA mortgage holders.
The VA Loan Guaranty Program began in 1944 in order to give soldiers returning from war the same opportunities to own homes as their civilian counterparts. Today, the general purpose of VA home loans is to provide veterans with secure home financing in appreciation for their service to America. The program is administered by the Veterans Benefits Administration, an organizational element of the U.S. Department of Veterans Affairs.
A VA loan is made by a VA-approved mortgage lender with a portion backed by the good faith and credit of the U.S. Government. The benefits of the VA loan program create one of the safest and most secure home financing options for VA-eligible borrowers.
Although there are over 23 million people eligible for VA home loan benefits, less than 10 percent have a VA mortgage. Typically those with two years of active duty in branches of Army, Navy, Air Force, Marines and Coast Guard are eligible for the VA Home Loan Guaranty Program. Some surviving spouses and Reservists/National Guard members also qualify.
A Certificate of Eligibility (COE) is needed before anyone can apply for a VA loan. A COE tells lenders how much entitlement a borrower has. Most COEs can be obtained by an approved VA lender on behalf of a borrower using a system called ACE.
Borrowers can expect to find the following benefits associated with VA loans:
- No down payment (100% financing)
- No private mortgage insurance (PMI)
- Relaxed qualifying standards
- Competitive interest rates
- No penalties for mortgage pre-payment
- Cash-out and debt consolidation
- Streamline rate reduction
Generally, full entitlement is for a loan of $417,000. Income and credit qualifying is required before a loan of any amount is made. The VA guidelines for income and credit qualifying are more relaxed than that of many conventional loan programs.