VA loan information and how to get a VA mortgage

What is a VA loan?

The Department of Veterans Affairs (VA) loan program began after World War II to help veterans buy homes. While the FHA insures a lender against loss, the VA guarantees a lender against loss. The difference between insurance and a guarantee does not affect the borrower. These are differences in the procedures that a lender must follow to be reimbursed for a loss. (The following is the procedural difference as explained by HUD.)

VA - When a delinquency is reported to VA, and no realistic alternative to foreclosure is developed by the loan holder or through VA's supplemental servicing of the loan, VA determines, through an economic analysis, whether VA will (a) authorize the holder to convey the property, securing the VA Loan to the Secretary of Veterans Affairs following termination or (b) pay the loan guaranty amount to the holder. The decision as to disposition of properties securing defaulted VA Loans is made on a case-by-case basis, using the procedures set forth in 38 U.S.C. Section 3732(c), as amended.
FHA - Upon default, the lender - depending upon the circumstances - may (a) assign the mortgage to FHA, (b) acquire (through foreclosure or deed in lieu of foreclosure) and convey title to FHA, or (c) work with the borrower to sell the property before the foreclosure sale. The lender will receive insurance benefits equal to the unpaid principal balance of the loan, plus approved expenses.

The original program had two main goals. First was to make it easy for veterans to buy a home by not requiring a down payment. Second was to protect veterans from overpayment. In order to accomplish this, the rules were that the buyer could pay no more than the appraised value of the property. The appraisal, called a certificate of reasonable value (CRV) was done by a VA-approved appraiser. There was also a maximum interest rate that could be charged, as well as a restriction on points. Today, the no down payment benefit still exists. The other protections have been eliminated.

How do I find out if I am eligible for a VA mortgage?

Loans guaranteed by the VA require military service for eligibility. A certificate of eligibility is issued to the veteran. If you have served in the military or were activated from the National Guard, you may be eligible. Type “VA loans” into your search engine or go to www.va.gov, click on “Benefits,” and then click on “Home Loans,” for complete information.

Although you can contact the VA directly to determine eligibility, the VA recommends that you first contact a lender. Most lenders now have access to a database that will enable them to determine whether you are eligible. A second reason to see a lender first is the same as for any loan that you plan to get; you can be prequalified or preapproved. You will have a good idea of the price range that is realistic for your new home. Call your local VA office for a list of lenders in your area. It is important to note that spouses of deceased veterans may be eligible. There are also special programs for disabled veterans and direct loans to Native Americans for certain tribal lands.

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