Veteran Administration home loans- boon or bane.

War veterans of the United States Armed Services are entitled to receive home loans by banks and financial institutions on application. These loans are called as Veteran Administration Home Loans. A part of this loan is paid back by the Veterans Administration (VA). Thus in the event of defaults committed by the borrowers, the lender is at risk only for the part to be paid by borrower. The amount that is guaranteed to the veterans by the VA is known as the entitlement. This entitlement amount is what the VA pays the lenders in case of defaults by borrower.

The eligibility criteria of the loan are a bit confusing and are followed very strictly. All veterans of the US Armed Forces who has served a minimum period of 90 days and were honorably discharged are eligible to avail this loan. These 90 days of eligibility must have been in the World War II, Vietnam Era, Persian Gulf War, Korean Conflict, Afghanistan and Iraq in combat. There is a peace time eligibility criteria too. This mandates that the veteran must have served for 181 days and discharged honorably for qualifying for this loan. There are many other people in the services that are eligible for this loan too. These include National Guard and Reserve members after completion of six years of service, US citizens in army of allies, surviving spouses of armed service officers, spouses of prisoners of war and those who are missing in action exceeding 90 days.

The eligible people have to prove their eligibility by producing a certificate of eligibility that is issued by the VA. This certificate is mandatory for receiving the veteran’s loan. The eligibilities are carefully scrutinized before the certificate is issued. The certificate is only one of the important documents needed to apply for the VA loan. The main draw back of the loan is that it is only for houses. Meaning, the money should be used only for the purpose of purchasing a home that too for personal residence. Any type of house can be purchased like a townhouse, condo, newly constructed home, manufactured home, home improvement projects and renovations.

The VA loans are a boon to many. They do not have any upper limit. Any amount can be applied for. A 2% fee is charged by the VA and this is usually deducted from the loan amount. If the borrowers are able to make a 5% down payment then the fee can be reduced. The VA loans can finance your home a full 100%. They are practically hassle free and give the borrowers no trouble at all. There are no pre payment penalties or private mortgage insurance. The rates are low and the qualifications for the loans are made easier with assistance from the VA.

Definitely a boon, VA loans can be taken more than once. Borrowers can receive a second loan amount even before repaying the first loan completely. The VA website offers all solutions and information required by the prospective borrowers.