Veterans and some active members of the armed forces can get a big helping hand from Uncle Sam when they purchase, build, repair, or upgrade a home.

Veterans and some active members of the armed forces can get a big helping hand from Uncle Sam when they purchase, build, repair, or upgrade a home.

VA Loan Information

The U.S. Department of Veterans Affairs (VA) guarantees loans made by private lenders to eligible veterans looking to purchase a home, condominium, or manufactured home. Depending on discharge information, length of service, and other factors, VA loans are available to some veterans, active military personnel, reservists, and members of the Public Health Service.

Since the VA backs the loans, lending institutions are able to offer attractive loans and terms to borrowers. The VA can guarantee a much higher amount than is available with most conventional home loans. VA-backed loans also can be used to refinance an existing home loan or obtain up to a certain sum of money in equity through a “cash-out” option.

VA Loan Advantages

VA loans offer several advantages.

- There is no down payment required.

- The loans are easily accessible for qualified veterans because most private lenders offer them.

- There can be substantial cost savings associated with a VA loan. The government caps the amount of fees that institutions and businesses can charge when dealing with VA loan home purchases. For example, there is a limit on how much veterans can be charged when it comes to closing costs, origination fees, and appraisal fees.

- There also is no private mortgage insurance (PMI) required—in fact, the VA prohibits lenders from requiring it of loan applicants.

- There is no penalty for prepaying on a VA loan.

VA Loan Protection

After a qualified veteran purchases a home with a VA loan, the investment is protected in several ways. A few of these protections are as follows:

- A builder must provide a veteran with a one-year warranty that the home has been built in accordance with VA specifications.

- A similar provision exists for new manufactured homes.

- The VA will reimburse a veteran for the correction of any structural problems affecting a home's livability if the residence was completed under VA or HUD inspection. To receive this benefit, a veteran must request help within four years of obtaining the loan.

VA Loan Flexibility

Those who qualify for a VA loan have some flexibility in how they choose to spend the money. With a VA loan, it is possible to do any of the following:

• Purchase a home or condominium

• Build a home

• Repair or upgrade an existing home

• Buy a manufactured home

• Buy and improve a lot for a manufactured home

• Install weatherization improvements to your home

• Buy a home and upgrade it with energy-efficient features

• Refinance an existing VA loan to get a better interest rate

• Refinance a manufactured home loan so that you can purchase a lot

VA Loan Qualifications

To qualify for a VA loan, active and former members of the armed forces have to meet specific criteria for discharge conditions, as well as guidelines for length and time of service. In some cases, widows, widowers, and spouses of prisoners of war or those missing in action also can qualify for VA loans.

Loan applicants must obtain a VA Certificate of Eligibility (http://www.valoans.com/eligibility.cfm) in addition to meeting the other military requirements. This certificate basically says that a person is eligible for a VA loan provided that he or she has received an honorable discharge from the armed services and has served a certain number of days as an active member of the military. However, just because a veteran obtains a VA Certificate of Eligibility does not mean he or she will be granted a loan for the amount requested. As with a conventional loan, the actual mortgage amount is based on a veteran's income, credit history, assets, and current debt load.

In some cases, a veteran can qualify for a second loan if he or she is able to obtain a VA Certificate of Eligibility for any unused amount of what he or she is entitled to receive through the program. This is called partial eligibility, and, if granted, it may require the veteran to negotiate a down payment with a private lender. In some cases, the amount that remains may not be enough for an entire second loan. Because partial eligibility can be confusing, it is best to seek the advice of a VA representative before filling out any forms or signing any papers.

Additional Resources

• Veterans Administration http://www.valoans.com

• Federal Trade Commission http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea03.shtm

• DisabilityInfo.gov http://www.disabilityinfo.gov