What Is A Veteran’s Affair (VA) Loan?
A VA home loan is actually a guarantee rather than a loan. The VA does not actually lend the money to the borrower, but promises to make good to the lender should the borrower default on the loan. This promise from the government helps many people get loans that they might not otherwise be able to get.
A VA loan also comes with some very helpful and cost saving aspects. Many veterans may not know that a VA loan carries with it caps for closing costs which can save the borrower a lot of money at closing time. The VA also allows for some leniency to qualified VA borrowers who are having temporary financial problems.
Some of the other benefits that a VA home loan offers include such things as longer terms of repayment, no down payment for certain cases, prepayment rights, and accurate assessments of the property value for the planned home. There are many other benefits as well.
There are some issues that VA loan borrowers should be aware of as they go through the process of buying a home. For example, when you buy a home through a VA home loan, the VA does not offer any type of guarantee that the house is free from defects. The VA will certainly do an appraisal of the property, but this should not be taken as an official inspection of the property.
In addition, the VA does not require or even order builders to correct problems or defects that they (the VA) or you may find during the building of a property. That is your responsibility. In fact, you should always get an expert to inspect the house in an official capacity as it is being built (in new home construction projects) or as is with standing homes.
The VA will not be able to offer legal advice either. You, as the buyer, must use your own attorney for those matters. It is your responsibility to be aware of the laws that govern your deal and your property. Even with these restrictions, the VA still offers a great deal for many veterans.
A VA loan can also be a flexible loan. In addition to helping secure loans for standing homes and for building new homes, a VA loan can also be used to purchase a standing home and improve the home at the same time. They can also be used to improve an existing home by adding new energy efficiency technologies. There is also a provision for people to use a VA loan to purchase a manufactured home and lot, as long as the right conditions are met.
In order to qualify for a VA home loan, the borrower must be within a certain debt ratio. When your personal income, credit card debts, car loans, and the new indebtedness created by the VA mortgage are all tallied up, the maximum debt ratio you may have and still qualify for a VA home loan is 41%. As you might imagine there are many other factors that will also be used to measure your creditworthiness and the more issues you can resolve before applying the better.
If you are considering applying for a VA home loan, you may want to visit with a debt counselor to see how you might improve your financial status before beginning the application process.