By far one of the most well-known VA benefits is the ability to buy a home without a down payment. But it is one of those perks that sparks a flurry of questions: “What other costs are involved?” “Is there a catch?” and, of course, the big “Why?”
So we thought we’d put those skepticism to rest with a complete walk through of the VA home loan entitlement.
About the VA loan guarantee
Private lenders make VA loans, not the VA itself. The VA loan guarantee does not guarantee that you will be approved. If lenders follow certain guidelines put in place by the VA, a portion of each loan is insured against default. This reduces the risk on the part of the lender and encourages banks to lend money.
Essentially, if you use a VA loan to buy or refinance a home, the federal government says it will pay back a portion of the loan if the borrower defaults. The portion of the loan backed by the VA replaces the need for a down payment.
The VA loan guaranty has a limit, which varies based on location. For a look at the limit for your area, check with the Department of Veterans Affairs.
Why do veterans get this benefit?
Upon signing the G.I. Bill on June 22, 1944, President Franklin D. Roosevelt said, “The members of our armed forces — for they have been compelled to make greater economic sacrifice and every other kind of sacrifice than the rest of us, and are entitled to definite action to help take care of their special problems.”
The G.I. Bill introduced sweeping benefits for veterans returning home from World War II. The sacrifices the members of our armed forces make for our country are insurmountable and this benefit is just one of the many ways we say, “Thank you.”
Saving for a down payment is one of the hardest aspects of buying a home. This program gives our veterans a hand up after years of personal and financial sacrifices. For more information on how to obtain a VA home loan, contact us today.
Sources:
http://mortgagesforveterans.org/veterans/va-loans-basics/
http://www.benefits.va.gov/homeloans/purchaseco_eligibility.asp
