A VA home loan is a type of loan designed for veterans that provided active duty service during World War II and subsequent periods since. This loan can be used to buy, build, or repair and restore a home. VA home loans have several advantages. In most cases, no down payment is required. One may negotiate interest rates with the lender and one does not have to pay for monthly insurance premium. The loan can also be an assumable mortgage. Moreover, the borrower has the right to prepay the loan without being subjected to penalty. Below, you will find a list of requirements that one needs to have to qualify for a VA home loan.

Eligibility

To be eligible for this loan, one must be a veteran who gave active duty service (with honorable discharge) during the World War II, the Korean conflict, or the Vietnam era for at least 90 days. Veterans who provided service during peacetime should have rendered at least 180 days of service. Reservists and National Guard Members who served from August 2, 1990 onwards and have at least 90 days of service may also be eligible. To prove one’s eligibility, one should obtain aCertificate of Eligibility (COE), a document used to prove one’s service and eligibility for this loan. To get this certificate, one must accomplish and submit VA Form 26-1880.

Certificate of Reasonable Value

The Certificate of Reasonable Value (CRV) is a document that indicates the property to be purchased by the veteran based on the estimate of an appraiser. This is necessary because the loan cannot exceed the amount on the CRV. A veteran can obtain this document by submitting VA Form 26-1805 also known as the Request for Determination of Reasonable Value through mail to the Loan Guaranty Division. One may also call up the VA office to request for an appraiser.

Application

The process of applying for VA loan is practically the same as applying for other types of loan. First, one would fill up an application form which has the same format as those used by conventional loans. Then the lender will assess the income, assets, credit report and liabilities of the applicant. If the applicant is an eligible veteran who has an eligible purpose for the loan, if the loan covers the CRV, and if the veteran has good credit rating and stable income, getting approval for the application is not difficult. In fact, only 10% of applications for VA loans are submitted to the VA office for approval. The rest are approved right away by the lender through VA’s automatic procedure.

Costs

There are several fees associated with VA loans. A basic funding of 2% of the loan should be paid by non-exempt veterans. If the veteran pays a down payment of 5 to 9 percent, this fee will be reduced to 1.5% while a 10% down payment will lower it to 1.25%. The borrower will also need to pay for closing costs, which vary from one lender to another.