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VA Loan Program

December 10, 2023 - 8:59 AM EST

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VA Loan Program

In an effort to reward World War II veterans for service to their county, the U.S. Congress passed the Serviceman's' Readjustment Act of 1942. This act, among other things, provided home loans to veterans who served their military duty honorably. This act has been amended numerous times since 1942 and now allows qualified veterans to not only obtain home loans but mobile home loans, condominium loans and business loans, all of which are guaranteed by the United States Government.

The Veterans Administration does not make the actual loan to the veteran; a private lender loans the funds and the Veterans Administration guarantees up to 60% of the loan amount, in the event the veteran defaults on the loan. The VA loan program for owner-occupied housing is one of the best loan programs in the free world. It is possible for a veteran to obtain 100% loans with absolutely no downpayment and the seller or builder is allowed to pay all of the veteran's closing costs, making the total cash required to purchase, in some instances, zero. Generally, the Veterans Administration is a little more liberal than conventional lenders would be with regard to the veteran's credit standing and qualifying for the VA loan, although recent VA underwriting changes make the qualifying criteria similar to conventional mortgages.

Veterans make up a much larger part of the general population than most people would assume. Presently, there are some 33 million veterans in the U.S. and approximately 25 million are married. This brings the total veteran population including their spouses to some 58 million people. When you subtract individuals too young to purchase real estate (under age 18), we find that almost 40% of the adult population of the U.S. are veterans or married to a veteran!

Other facts about the Veterans Administration that few people may be aware of:

  • VA loans made before March 1, 1988 are fully assumable without qualification. Any type of creative financing such as lease purchases, contract for deed, land contracts or wraparound mortgages can be employed in the sale of these homes. VA loans made after March 1, 1988 require the buyer assuming the loan to qualify. Owner-occupants or owner-investors can assume these loans, if qualified. They need not occupy or be veterans. These loans can also be sold without loan qualification on installment sales such as lease purchases, contract for deed or land contracts, as long as the original veteran remains the owner of record and is willing to remain liable for repayment of the loan.
  • Reservists/guardsmen who have completed six years of satisfactory duty in any U.S. reserve component, 90 days in a "War Zone", 181 days of continuous active duty or were discharged before they completed six years due to a disability or reduction in force are eligible for full VA home loan benefits, just like "regular veterans".
  • Veterans' widows (who have not re-married) are eligible for VA home loans, if the veteran died while in the service or in a service-connected death after release from the service. This benefit is extended to reservists, as well as regular veterans.
  • Veterans can obtain loans, which exceed the sale price, so that additional improvements can be financed along with the purchase of the home. The additional loan amounts can be used to make the home energy efficient, add rooms, finish out basements, add a garage or update kitchens, electrical or plumbing systems.
  • Veterans are allowed to refinance their existing mortgages from conventional or FHA loans to VA loans. If they already have VA loans, they may refinance to lower interest rate VA loans without having to re-qualify for the refinance.
  • Veterans seeking loans above the VA maximum loan amount with zero down can put 25% down on the amount over the maximum loan and reach higher priced homes. (Not all VA lenders will allow this arrangement - but VA sets no maximum loan amounts and many lenders only require a 25% security to include loan guaranty and downpayment in combination.)
  • Veterans who receive VA disability payments may have the VA funding fee waived on VA home loans.