There aren't enough ways to repay a military serviceman who has fought for his country--but a VA housing loan tries to do its part. If you are a military member who has served at least 181 days on active duty, or in the National Guard or Reserve for at least six years, or are the spouse of someone who has been killed in the line of duty, you may be eligbile for a Veterans Administration (VA) home loan
The VA loan has its origins in the original Servicemen's Readjustment Act, also known as the GI Bill of Rights, which was signed into law by President Franklin D. Roosevelt in 1944. The loan was meant to provide veterans and their familiies housing assistance through a federally guaranteed loan with no down payment. Since its creation, the VA loan has helped more than 18 million servicemen buy homes.
What are the benefits of a VA loan?
With a VA loan, you would get up to a maximum of $417,000 in all states--except Alaska and Hawaii, where the limit is $625,500. No down payment is required, and neither is private mortgage insurance. Interest rates are usually lower than conventional rates, and there are no pre-payment penalties. In addition, under the VA loan's provisions, closing costs which can come up to 3-4% should not be paid by the buyer--so these costs will have to be covered by the seller.
What is required to obtain a VA loan?
You'll need your Certificate of Eligibility--which your lender can request online--as well as your discharge paperwork. You must have a maximum debt ratio of 41%, enough regular income to pay the mortgage, and a reasonable credit rating. A "funding fee" of around 2% is levied on first-time borrowers, and just above 3% for a second time. However, this fee can be financed into the loan amount, so veterans can still make zero downpayment on a home.