How the Program Works

• The VA loan program is a government loan guarantee for home loans offered to veterans and active duty military personnel. The loan itself comes from a private lender, not the government. The government simply guarantees the loan, which means that the bank will be repaid if the borrower fails to repay the loan. This lowers the risk to the lender, making it more likely that a loan will be approved, even without a down payment or excellent credit rating. While the guarantee makes it easier for veterans to get loans, the government cannot force lenders to loan money to veterans through the program.
  
  

Benefits

• Through the VA mortgage program, veteran and active duty military personnel can buy homes with no money down. Because the government guarantees the loan, the borrower does not have to pay mortgage interest when buying a home without a down payment. The rates are competitive with other loan providers, often .5 to 1 percent lower than the veteran can get with a traditional lender. Because of the government guarantee, lenders are more willing to loan to less than perfect borrowers under the VA loan program.
  
  

Who Qualifies

• The VA mortgage plan is available to any veteran or active duty military personnel. Some members of the reserves and National Guard are also qualified. Applicants should file VA Form 26-1880, the Request for Certificate of Eligibility, to discover whether or not they qualify for the program. Some lenders have access to an online system that allows them to apply for the Certificate of Eligibility on the borrower's behalf. Proof of service is required to determine eligibility for the program.
  
  

Process of Getting a Loan

• To get a VA loan, start by getting your Certificate of Eligibility. Then, choose a lender that offers the loan program. Show your Certificate of Eligibility to the lender, and fill in the application. The lender will then pull your credit rating and order an appraisal on the property, which you may have to pay for yourself. Keep in mind that the government guarantee makes your credit rating slightly less important, but a terrible credit rating will likely lead to a denial of your application. If you are approved, you will select a home and make the purchase. At this point, you repay the loan as you would any other loan, making regular monthly payments as outlined by the bank.
  
  

Limitations

• VA loans have a few limits. The VA loan program cannot be used to purchase property outside of the United States. These guaranteed loans are offered to veterans and soldiers who intend to live in the property after it is purchased. Occupancy by the veteran or soldier's spouse fulfills this requirement, but occupancy cannot be established by friends or other family members. The VA does not repay the loan if the veteran dies before it is paid. This responsibility falls to the spouse, co-borrower or the veteran's estate.