Overview of VA Loan

VA Loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs, it guarantees loans made by an approved institutional lender, much like the FHA loan. The main difference between the FHA loan and the VA loan is:

  1. Only an eligible veteran may obtain a VA loan
  2. The Veterans Affair does not require a down payment up to a specific loan amount, which means a qualified veteran could get 100% financing

VA Loans are made by a lender, such as a mortgage company, savings and loan or bank. The Veterans Administration guaranty on the loan protects the lenders if a default occurs, this is intended to push lenders to offer better rates for veteran loans.

VA Loan Process

Before applying for a VA Loan you must posses a Certificate of Eligibility (COE) which is obtained from the Veteran Administration. This certificate will show your right to obtain the loan. When you find the home you are looking for a VA-approved conventional lender (i.e Pacific Mortgage Group) will take the certificate and loan application to process according to the VA guidelines. The lender will then request the Veteran Administration to assign a licensed appraiser to determine the value of the property, who will then give a Certificate of Reasonable Value (CRV). The loan may not exceed the value shown in the CRV.

Fees and Closing Costs

The Veteran is required to pay a funding-fee for first-time use. The funding-fee for the second time would be higher if a down payment is not made since the veteran already had a chance to use this benefit once.

The lender closing costs may not be included in the loan, and the costs may be paid by either the buyer or the seller. The typical closing costs include the COV, credit report, loan origination fee, discount points, title insurance, and recording fees.You can learn more at benefits.va.gov