VA Home loans are often made without any downpayment at all. Aside from the veteran's certificate of eligibility and the fact that the appraiser is assigned by VA, the application process is not much different than any other type of mortgage loan.
If you are or have been in the military (including the Reserves or National Guard), you may meet the VA mortgage Eligibility. The Department of Veterans Affairs, commonly referred to as the VA, has made home ownership easier for veterans (and in some cases their surviving spouses) through its loan guarantee program.
If you qualify under the guidelines, you can buy a home with little or no down payment and often at a lower interest rate than conventional fixed-rate mortgages.
While the VA does not actually lend the money, it assumes some of the risk for the loan. To partially offset this, they charge a "funding fee," which can be paid in cash at closing or can be financed over the life of the loan.
In addition, VA home loans are assumable under certain conditions, which means if you decide to sell your property, the buyer may take over your mortgage with the same interest rate and payments -- a good selling point.
The buyer who assumes the loan does not have to be a veteran. The VA loan often is a very cost-effective alternative for veterans or current military personnel.
Their are limits on the amount you can finance. But there is greater flexibility for the payment of closing costs: the seller is allowed to pay all discount points and other closing costs.
Veterans who had a VA loan before may still have "remaining entitlement" to use for another VA loan. The current amount of entitlement available to each eligible veteran is $36,000. This was much lower in years past and has been increased over time by changes in the law. For example, a veteran who obtained a $25,000 loan in 1974 would have used $12,500 guaranty entitlement, the maximum then available. Even if that loan is not paid off, the veteran could use the $23,500 difference between the $12,500 entitlement originally used and the current maximum of $36,000 to buy another home with VA financing. For certain loans in excess of $144,000, the basic $36,000 entitlement can be increased to a maximum guaranty equal to 25 percent of the Freddie Mac conforming loan limit for a single family residence, minus any previously used entitlement.
Most lenders require that a combination of the guaranty entitlement and any cash downpayment must equal at least 25 percent of the reasonable value or sales price of the property, whichever is less. Thus, in the example, the veteran's $23,500 remaining entitlement would probably meet a lender's minimum guaranty requirement for a no-downpayment loan to buy a property valued at and selling for $94,000. The veteran could also combine a downpayment with the remaining entitlement for a larger loan amount.
Veterans can have previously-used entitlement "restored" to purchase another home with a VA loan if:
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