By using a loan backed by the Department of Veterans Affairs, more than 19 million veterans and service members have financed their home. The VA Home Loan Guaranty program offers a plethora of advantages to borrowers. Military homebuyers should at least consider a VA loan as an option to finance a home, whether it’s their first home or their dream home on a beach front.

Although the VA loan program comes with several financial perks, the most popular one is the possibility of paying nothing down. Certain veterans and active-duty members qualify for zero percent down to finance a home worth up to $417,000. That maximum for VA loans is higher in more expensive housing markets, but $417,000 is most common.

While the minimal down payments save money in the short term, negotiable interest rates with VA loans save military homebuyers thousands of dollars in the long run. Since the VA guarantees up to 25 percent of each loan, VA-approved lenders are willing to lower interest rates. Because of the VA’s guarantee, the lenders incur less risk. Furthermore, active-duty personnel have capped interest rates. Other upsides to the VA loan program include:

  • No private mortgage insurance (PMI) each month
  • Up to 6 percent of closing and concession costs paid by the seller
  • Refinancing options that lower interest rates
  • No prepayment penalties

Qualifying for a VA loan is easier for military members, too. Almost 80 percent of those who qualified for a VA loan could not qualify for a conventional loan. This is due in part to more lenient qualifying standards. VA-approved lenders don’t expect unmarked credit histories, and look for credit scores of 620 or higher. Also, a previous bankruptcy or foreclosure does not automatically disqualify VA loan applicants.

You may qualify for a VA loan if:

  • You served on active duty for 90 days during wartime or 181 days during peacetime
  • As a member of the National Guard or Reserves, you served for at least six years
  • You’re the spouse of a service member who died in the line of duty or because of a service-related injury and you have not remarried

The first step in getting a VA loan is completing a Certificate of Eligibility (COE). This document asks for basic information and confirms that you meet the initial requirements for the VA loan program. The COE form is available through the VA or a VA-approved lender. For more information on VA loans, contact a VA-certified lender – such as VA Mortgage Center.

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  1. The Department of Veterans Affairs does not have a specific figure imposed as a maximum loan amount for VA mortgages. But the VA will not guaranty any loan amount; the VA sets maximum loan guaranty amounts which vary by county and are subject to change from year to year depending on market conditions.

    A “typical” maximum VA loan is guaranteed for $36,000 for loans below $144,000. That means the VA promises the lender $36K should the buyer default on the VA mortgage. For loans above $144,000, the VA will guaranty up to 25% based on county limits listed at the VA official site.

    The reason for this varying figure is simple; not all housing markets are equal. Some are more expensive than others, and to set one VA loan standard for all housing markets would penalize some buyers and benefit others. A rate that varies depending on housing market conditions in a given area is fair and flexible.

    According to the VA, “…a veteran with full entitlement available may borrow up to the 2011 VA limit shown below and VA will guarantee 25 percent of the loan amount. If a veteran has previously used entitlement that has not been restored, the maximum guaranty amount available to that veteran must be reduced accordingly. Lenders should check their own investor requirements regarding guaranty amounts and down payments.”

    To help borrowers, lenders and real estate agents, the Department of Veterans Affairs publishes an annual list of county loan limits for VA mortgages. The VA list consists of loan limits for all high-cost counties broken down by state; it’s a directory of unique high cost markets from Alaska to Wyoming.

    The VA list does not include all counties–any markets not specifically listed in the document have a 2011 limit set at $417,000. If you don’t see your county in the VA master list, it’s safe to assume the county limit is $417,000. Questions about the limits in your county should be directed to the nearest VA Regional Loan Center.

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