How Does Veterans Administration Loans (VA Loans) Work?

The US Department of Veterans Affairs offers a loan guarantee service to veterans of the US military. This service allows US servicemen or their surviving spouse to get 100% finance without a down payment or mortgage insurance, or they will get 90% to refinance on their existing home.

Working Of VA Loan

VA loan is not actually a loan and neither is it issued by the Veterans Affairs. VA loan actually offers a guarantee on behalf of borrowers to private lenders like mortgage companies and banks, which means if the borrowers are not able to pay the loan amount at some point in time, then Veterans Affairs will. However, such scenarios rarely appear because veterans are proud individuals who would not do anything that could dent their reputation. In VA loans, the veterans get lower down payment requirements and interest rates.

What Else Does The VA Loan Program Do?

The VA Loan program also delivers pre-purchase counseling, which means if a person is looking to buy a house and wants to obtain a basic understanding of the homeownership process, then VA officers will sit down with that person and educate him about it.

Does Entitlement To A VA Loan Assure A Mortgage?

No, that is not the case, as Veterans Affairs are not authorized to force a lender to issue a home loan to the borrower. It can only help to make the borrower an attractive recipient for the loan. The person trying to get the loan must meet basic income and credit requirements. However, if the lender is worried about the poor credit history of the veteran, then the loan may either be denied or offered at a higher rate of interest.

How Much Are Veterans Entitled To Under VA Loan Scheme?

Veterans are entitled to $36,000, but this amount can vary from region to region or the price of the house and the amount needed. The amount changes every year, so it is best to consult a mortgage expert to find out the exact amount veterans are entitled to under VA loans.

How To Get A VA Loan?

In order to get a VA loan, you must get a certificate of eligibility. This certificate may be received either from the lender or from the Department of Veterans Affairs. Most recent information related to veterans is stored in an online database known as ACE (Automated Certificate Of Eligibility), so it is using this database that the lenders can find out if the borrower has a certificate or not.

If you are a borrower, then you need to select a home followed by signing a purchase contract in order to get a VA home loan. The next thing you need to do is choose a lender followed by completing the loan application with your certificate of eligibility. As you do so, the lender is going to contract Veterans Affairs to assign an appraiser for determining the market value of your house.

As you’ve been issued a certificate of reasonable value, your lender is going to let you know that your loan has been approved. At that time, you will attend the closing where you will be explained the terms and conditions of the loan by your lender or its attorney followed by which you will sign the loan agreement.

Upon signing the agreement, the loan will be sent to Veterans Affairs for guarantee, at which point you will have your Certificate of Entitlement annotated and sent back to you. As your loan is approved and all the paperwork is done, you can move into your house.