VA Loans Explained

VA Loan : A government-backed mortgage loan supported by the US Veterans Administration.

Banks and mortgage companies make a special type of home loan to veterans of the U.S. Armed Services. A portion of each loan is guaranteed by the Veterans Administration (VA), and protects the lender's investment if the borrower defaults.

The guaranteed amount of a VA loan is called an entitlement.

The current maximum entitlement for loans up to $144,000 is $36,000, with the exact figure determined by your loan amount.

The maximum entitlement for VA home loans over $144,000 is $60,000.

An entitlement is not a cash payment to you or to the bank. It is the amount the VA promises will be paid to the lender if you default on your loan. If that happens, the VA may pursue you to recover those funds.

Eligibility Requirements for VA Loans :

Click here to visit the VA website for VA eligibility

Pros and Cons:

What Are the Benefits of a VA Loan?

1. 100% financing available, no down payment loans are common.
2. No Private Mortgage Insurance (PMI).
3. No prepayment penalties.
4. Loan qualification can be easier than if you were applying for a conventional loan.
5. Sellers may pay all closing costs.

What Are the Negatives of a VA Loan?

1. VA loans made prior to March 1, 1988, can be assumed with no qualifying of the new buyer. If a buyer of an assumed VA loan defaults, the veteran homeowner may be liable for funds.
2. Sellers are often asked to pay a portion of closing costs, so they may not be eager to negotiate the sales price of the home.

Related Article: FHA Loans Explained >>