The VA Loan is a type of mortgage loan that is typically issued by pre-approved lenders, brokers, and banks that is guaranteed by the U.S. Department of Veterans Affairs (VA). This program was created by the United States government in 1944 when world war II was winding down. The core purpose was to help the returning service members to be able to purchase their homes without any prior need of making a substantial down payment up front or for that matter even a need for having an excellent credit rating either.
VA is a great benefit that has helped guarantee over 2 million VA loans to retired veterans, active duty military as well as their families to purchase or refinance an existing mortgage. As of today, the VA Home Loan program is now far more important than it has ever been, for both current service members as well as past Vets. This is due in large part to the fact that many financing and lending institutions all over the nation, have effectively tightened almost all of their lending requirements because of the recent housing market collapse. This is precisely why the VA Loan is an important lifeline for many military homebuyers and the fact that is not many 100% home financing options available today in Michigan.
VA loan eligibility requirements criteria
There are certain conditions and requirements that are deemed necessary before an individual can be termed eligible for a VA housing loan. Some of them include the following key points:
- It is imperative that the applicant has served 90 consecutive days of active service during actual wartime. (War games are not included in this three-month stipulation)
- The Vets should have served at least 181 days (or more) of active service.
- At least six years or more of service in the US National Guard or any Reserves under military control
- The spouse of any service member who may have died either in the line of duty or any service member who may have suffered from any disability resulting from his or her time in the service.
Certain points to take in consideration when applying for a VA housing loan:
VA housing loans are not issued by the VA itself
The VA is not a lending institution, nor is it in the business of issuing any sort of home loans. Instead, what the agency actually does is to provide a guarantee to the approved lender on each duly qualified mortgage loan.
Backed and guaranteed by the U.S. government
Once the applicant has been approved, the agency usually guarantees up to almost a quarter of the actual loan amount. The guarantee in effect gives the lending institutions the desired confidence to proceed with the loan application and thereby helps service members (and veterans) secure really great terms and rates.
VA mortgages are available even with bankruptcy or foreclosure
Even service members who have a past history of bankruptcy and have even suffered foreclosure can also apply for a VA loan. However, all lenders will have minimum waiting time requirements, generally two years for BK and 4 years for past short sale or foreclosures.
There is a mandatory fee involved
While there is no specific monthly mortgage insurance associated with VA loans the one-time VA Funding Fee is required in most transactions. This fee is usually 2.3 percent of the total loan amount and helps the VA keep the program in circulation. This fee is required for both purchase as well as refinance loans options. It is possible to either roll it into the loan amount or waive it entirely for all those applicants who may well have suffered service-connected disabilities
Clearly defined limits for and on co-borrowers
While it is possible to opt for a co-borrower who may not be your spouse or for that matter, another veteran who has VA loan entitlement, but will nevertheless be living with you, then it may be necessary to pay a down payment, upfront.
VA loans do not have a prepayment penalty stipulation
It is possible for a borrower to make any extra payments he or she desires, as and when they want. This can help save them from shelling out substantial financial resources in paying interest over the duration cycle of the loan. It is also possible to be able to structure the payments of the loan in such a manner that they are automatically deducted every month.
No mortgage insurance involved
Mortgage insurance is an often mandatory monthly fee that is required to be paid with many other programs when there is no down payment of at least 20 percent. Since this particular loan facility is guaranteed by the VA, there is no need to pay any extra mortgage insurance.
The VA loans program is a great opportunity for veterans and active service members who put themselves in harm’s way for the good of the country, to avail low-cost housing opportunities that may not otherwise be available to their civilian counterparts.
Coast2Coast is proud to serve home buyers in Michigan 7 days a week. Please contact us for more information by calling the number above or just submit the Quick Request Form on this page.