How do Veteran’s Affairs loans work?
Like FHA loans, VA loans are partially guaranteed by the U.S. Department of Veterans Affairs, but not actually issued by them – loan terms may vary depending on the lender you choose to work with. However, the VA does impose some standards on the loans that they will guarantee – these rules will be consistent from lender to lender.
Only certain people can get a VA loan – active duty service members, honorably discharged veterans and the widows or widowers of deceased service members (while they have not remarried) can qualify for these kinds of loans. However, the VA only offers this benefit to those who served during particular time periods – an approved lender can help you obtain your Certificate of Eligibility (COE) which will indicate exactly how much benefit you can receive from the VA.
Only certain properties will qualify for a VA loan – any
property purchased with a VA loan must meet the VA Minimum Property
Requirements (MPRs), satisfaction of which will be determined by a certified
appraiser. This means that many fix-and-flips won’t qualify.
Only certain professionals can be involved in the purchase
process – the VA will only allow property appraisal to be conducted by a
certified appraiser. Additionally, you will need a termite inspection, which in
some states is a licensed profession. We can help you find the professionals
you will need for a smooth closing.
Sellers may be hesitant to work with a VA borrower – the
additional requirements imposed upon the purchase process have historically
stigmatized VA loans, and in a seller’s market, sellers may prefer offers with
other kinds of financing.
What are the benefits if I can get a VA loan?
You may be able to purchase a house with zero down payment –
however, there may still be closing costs to pay, such as appraisal and
You may not have to pay for mortgage insurance, even if you
bring a low or no down payment. This helps to keep your monthly payment low,
and can reduce the cost of borrowing overall.
Lenders are restricted from charging a prepayment penalty,
so you can make additional payments towards principle, lower the overall cost
of your loan, and pay of your mortgage early.
VA borrowers that experience financial hardship can often
get more time or additional assistance to avoid default, bring their mortgage
back in compliance, or short-sell the home, so borrowers are less likely to
These loans can stack with other programs that help military service members buy a home.
The VA also offers grants to some disabled veterans to help them buy an adapted home or make modifications to the home they own to accommodate their disability.