A VA home loan is a loan in which the VA makes a guaranty of the payment to the lender of up to 25% of the value of the purchased home. This allows the lending institution to have a certain amount of security in the repayment of the loan, and it allows the buyer to purchase the home with no money down.
This service can save the homeowner as much as 20% of the purchase price of the home which is required up front as a down payment in most home loans.
In the majority of cases, the amounts are equal to the reasonable current value of the home, plus the funding fee. The actual VA loans are made by participating lending institutions such as banks, savings and loans and general mortgage companies.
Lenders view VA loan holders as less of a risk, so they’re able to get a home loan with no down payment and with a better interest rate. Even though the VA bill was set up for veterans, one still must meet certain eligibility requirements in order to secure a VA loan.
Generally, the eligibility rule is that all veterans that have served on active duty and have been discharged favorably after having spent a minimum service time of 90 days during a time of war, or those who have spent at least 181 days in continuous service during a time of peace are eligible for a VA home loan.
Those who served in the National Guard and in the reserve units are required to have spent atleast six years in the service, and meet other criteria before being eligible for a VA loan. Just because someone is a veteran doesn’t mean they’re not held accountable for their credit standing when it comes to securing a VA loan.
Generally, the VA will pay strict attention to the past 12 months of the applicant’s credit history. If there have been any missed or slow payments, the VA will not look favorably upon the applicant as a prospect for a home loan.
In the case of an applicant having had a run of slow or missed payments, the VA will consider the matter as satisfactory once the applicant has made all payments on time for a length of twelve months.