VA Mortgage Guarantees

Helping Vets Get Mortgages

VA Benefits Include Loan Guarantees

The United States Department of Veterans Affairs (VA) provides many benefits to military veterans.

These include ongoing health benefits for personnel injured while on active duty and for military retirees.

The VA also provides mortgage loan guarantees to make it easier for veterans to afford a home.

What is the VA?

The VA is a government agency of the United States, which provides benefits to military veterans.

Various programs are made available to veterans and their families.

Some of these include disability compensation, pension, education assistance, home loans, life insurance, career change counseling, survivors' benefits, medical coverage and burial benefits.

According to the VA web site:

"Of the 25 million veterans currently alive, nearly three of every four served during a war or an official period of hostility. About a quarter of the nation's population -- approximately 70 million people -- are potentially eligible for VA benefits and services because they are veterans, family members or survivors of veterans."

VA Mortgage Loan Guarantees

As with other government loan guarantees, the VA provides insurance to back up loans issued by banks and other lenders. These guarantees allow veterans to purchase homes with better terms and lower interest rates than they would otherwise qualify for.

After a veteran finds a desirable piece of property, the next step is to apply for a loan through a mortgage lender. The veteran must then present discharge or separation papers. Once the mortgage application is complete, the property must be valued by an approved appraiser in order to establish its worth.

Finally, the application is processed and, if approved, the veteran who wishes to purchase the property gets the loan and can proceed with the home purchasing process.

It's worthwhile to note that while a regular lender provides the loan, the government guarantees repayment of part of that loan.

This protects the lender against potential loss if the buyer is unable repay the loan.

The guarantee has nothing to do with property itself, but serves two primary functions: protecting the lender which enables the lender to offer a mortgage to one who might not otherwise qualify and at terms and rates which make the loan more affordable.

The loan guarantees are limited. The basic entitlement is $36,000 but can go up if the home is valued at more than $144,000. Then you can get a mortgage guarantee of up to 25% of the Freddie Mac loan limit for single family homes.

These limits vary by region of the country and change annually. You lender can give you the exact guarantee figures for your area.

Right now the highest VA guarantee is $156,375 for homes in Hawaii and Alaska, $104,250 for most other areas of the country.

However, in certain circumstances, veterans can purchase homes with no down payment.

Veterans must also pay a fee to the VA for the guarantee. The fee varies with the amount of the down payment. It is 1.5% if there is a 5% down payment, dropping as the down payment increases. This fee can be financed.

(The fee is higher for National Guard and Reserves veterans.)

VA Housing Grants

The VA will provide grants of up to $50,000 for the construction of "Specially Adapted Housing" for seriously injured vets. This is to allow structural changed necessary to accommodate the disabilities suffered while on active duty.

Disabled vets also receive mortgage insurance up to $90,000 to repay the mortgage upon death.

VA Loan Guarantees for Transitional Housing

This is more a business opportunity. The VA is looking to guarantee loans for the construction of housing for homeless vets.

15 low-interest rate loans with an total dollar amount of $100 million will be financed by the Federal Financing Bank, an arm of the U.S. Department of the Treasury.

The VA will offer a 100 percent loan guarantee.

The idea is to build multi-family housing with at least 100 units each. In addition, those that qualify will have to help the vets with counseling and other services that will help them overcome addictions, stay sober and find and keep employment.

For those who wish to give something back to the community, this is a program to look into. Go to Loan Guarantee Program for Transitional Housing for more information.

The Bottom Line

Applying for a VA mortgage guarantee is probably more complex than it needs be and carries a cost which should be abolished.

Vets are probably used to dealing with bureaucy and might not mind it. If you find a good lender, most of the paperwork will probably be taken care of for you.

But the guarantee might help you get a house you couldn't otherwise afford, sometimes without a down payment. So take advantage of the somewhat limited generosity of a grateful people.

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