Veterans Administration loans (VA loans) are among the most popular and widely used loans, with benefits available to members of the United States military and veterans. It is a loan that is guaranteed by the federal government, and available to veterans that are eligible. Though the loans are made by private lenders, but since they are guaranteed by the federal government, the lender is protected against loss should the borrower default on the loan. This is beneficial to both parties, allowing borrowers to receive a home loan with no down payment, negotiable interest rates, comparable closing costs to other loans or lower, no private mortgage insurance, and no prepayment penalties.
A basic VA home loan entitlement is $36,000, although, most lenders will lend veterans up to four times the amount of the veteran’s entitlement. For loans that exceed $144,000, additional entitlement may be available. As of January 2006, qualified veterans can now get a no down payment loan up to $417,000.
VA benefits are not only limited to new home buyers, veterans who already own their homes may also benefit from a cash-out refinance. A cash-out refinance allows you to get a lower-interest rate loan to pay off higher debt, to pay for home improvements, or make other major purchases.
How do you know if you are eligible for a VA loan? The first eligibility requirement is that you must be a veteran. However, being a veteran does not automatically does not necessarily guarantee a loan. Lenders must have proof of military service and discharge must have been honorable. Long-term reservists and National Guard personnel, as well as, surviving spouses of veterans who died during service or as a result of a service, may also qualify for VA mortgage benefits. The veteran must sign a certified statement saying that they will occupy the home, and the property purchased must be on U.S. soil or in a U.S. controlled territory.