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VA guaranteed loans are
made by lenders and guaranteed by the U.S. Department of Veteran
Affairs (VA) to eligible veterans for the purchase of a home.
The guaranty means the lender is protected against loss if you
fail to repay the loan. In most cases, no down payment is
required on a VA guaranteed loan and the borrower usually
receives a lower interest rate than is ordinarily available with
other loans. Other benefits of a VA loan include:
- Negotiable interest rate.
- Closing costs comparable – and
sometimes lower - than other financing types.
- No private mortgage insurance
requirement.
- Right to prepay loan without
penalties.
- Mortgage can be taken over (or
“assumed”) by the buyer when a home is sold.
- Counseling and assistance available
to veteran borrowers having financial difficulty or facing
default on their loan.
Although mortgage insurance is not
required, the VA charges a funding fee to issue a guarantee to a
lender against borrower default on a mortgage. The fee may be
paid in cash by the buyer or seller, or it may be financed in
the loan amount.
A VA loan can be used to buy a home, build a home and even
improve a home with energy-saving features such as solar or
heating/cooling systems, water heaters, insulation,
weather-stripping/ caulking, storm windows/doors or other energy
efficient improvements approved by the lender and VA.
Veterans can apply for a VA loan with any mortgage lender that
participates in the VA home loan program. A Certificate of
Eligibility from the VA must be presented to the lender to
qualify for the loan.
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