Friday, May 22, 2015   

Home Loan Guarantee

The Department of Veterans Affairs (VA) will guarantee loans to be used for the following purposes:

  • To buy a home (including a townhouse or a condominium unit in a VA-approved project);
  • To build a new home;
  • To repair, alter, or improve an existing home
  • To refinance an existing loan (including an existing VA loan to reduce the interest rate);
  • To buy a manufactured (mobile) home and/or lot;
  • To buy and improve a lot on which to place an already-owned and -occupied mobile home; or
  • To refinance a mobile home loan in order to acquire a lot.

VA does not actually make the loan; rather, VA guarantees a percentage of the loan value, thereby reducing the risk to the lender. The actual amount of the guarantee will vary depending on the total amount of the loan, the value of the property involved, and whether the veteran or eligible person has previously used any of his or her loan guaranty entitlement. The amount of the loan may not exceed the reasonable value of the property; the maximum amount of the guarantee will be 25% of the Freddie Mac (Federal Home Loan Mortgage Corporation) conforming loan limit limitation for a single-family residence, as adjusted (for the year involved). If both spouses are veterans and each has loan guaranty entitlement available, their separate entitlements may be combined to obtain a greater guaranty amount.

The veteran or other eligible person must meet all of the credit-worthiness and the other usual and customary requirements of the lending institution, as well as making the down payment (if any) and paying the normal and reasonable closing costs. There is also a funding fee, which may be either paid separately or included in the loan; this fee varies according to the amount of down payment made. If the veteran is in receipt of service-connected disability compensation or is entitled to compensation but for the receipt of military retired pay, the funding fee is waived.

To receive the VA's Home Loan Guaranty, you must apply for a Certificate of Eligibility by completing VA Form 26-1880.

There are no time limits for using your Loan Guaranty entitlement.