VA Loans

A VA loan is a loan made to those who have served in the U.S. military, or an unmarried surviving spouse of a veteran who died on active duty or as the result of a service-connected disability. VA guaranteed loans are made by private lending institutions such as banks, saving and loan associations, credit unions and mortgage companies. While technically there is no limit to the amount that can be borrowed lenders usually restrict the mortgage to less than $360,000. Because each lender sets their own terms and rates it is important for borrowers to shop around for the best deal.

Any person who qualifies for a Certificate of Eligibility may apply for VA mortgages. However, the Certificate of Eligibility only allows you to apply for a VA loan it doesn't guarantee that you will be granted the loan.

The usual requirements for a mortgage apply. These include:

• Employment for a minimum of two years
• A debt to income ratio of less than 41%
• A good credit rating – usually 12 months of on time debt payments
• No bankruptcy claims less than two years old

As well as meeting the credit requirements. The following also apply:

• You must have sufficient cash available to cover all of your closing costs
• Normally a down payment is not required
• If the sale price is greater than what is considered a reasonable value proof must be shown that the difference is being paid in cash and not with another loan
• VA borrowers usually have to pay a funding fee (approximately 1.5%) to contribute to the cost of providing the benefit thereby reducing the cost to taxpayers. This funding fee doesn’t have to paid in cash and may be included in the loan.