Home loans for Veterans

Many banks and financial institutions have special provisions to sanction loans for war veterans of US Armed Services called the veteran home loans. A part of this loan will be guaranteed repayment by the Veterans Administration (VA). Thus the lenders are protected partly; if the borrower defaults.

The guaranteed amount is called entitlement. The entitlement is money that would be paid to the borrower or lender, it is the amount promised by the VA incase of default by the borrower.

The veterans who have served in the Armed forces for at least 90 days and not dishonorably discharged are eligible for this loan. The 90 qualifying days should have been spent in World War II, Korean conflict, Vietnam Era, Persian Gulf War, Afghanistan and Iraq during combat. Peacetime service eligibility is for 181 days without dishonorable discharge. National Guard and Reserve members are eligible for this loan after successful completion of six years of service and honorable discharge (or still in service).  There are other services that make you eligible for this loan. These are US citizens in the armed forces of an allied force; surviving spouses of persons in the armed forces, the spouse should be unmarried; spouses of prisoners of war and missing in action for 90 days and more.

A certificate of eligibility is issued by the VA that is mandatory for the availing of Veterans home loan. The certificate does not guarantee in any way approval of home loan from any institution. A VA home loan is sanctioned only for financing personal residences within the territories of United States. The loan can be used to purchase various types of houses like single family home, townhouse, condo, newly constructed residence, manufactured home or lot, home improvements and renovations.

The advantage of VA loans is that it does not have any upper limit. Usually the only catch is that the amount must be saleable in secondary market. In normal cases a 2% of the loan amount is charged as fee to the VA and is charged in the loan amount. If a 5 % down payment is made then the fee can be reduced. The loan can give 100% finance to your home. There are no hassles like private mortgage insurances, absence of penalties on pre payment. The interest rates are low and loan qualification is made easy with the aid of VA.

The VA home loan can be taken for a second time too. An additional amount can be allotted to you even though previous loan has not been completely paid. In the wake of new entitlement amount, the difference would be paid based on the current increased prices. This entitlement can be restored and used for the purchase of a new home. This is allowed if the previous home has been sold and has no dues in terms of any home loan. In another case this is allowed if a veteran takes up the loan and substitutes his entitlement for yours.

The website of Veterans Administration provides all the required information and helps you through the process.