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Mortgages for Military Veterans and Service Members: An Overview of VA Loans

Richard Barrington
LoanBiz Columnist

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Ever since GIs returned from World War II, the United States has had a tradition of giving military veterans a leg up in establishing themselves in civilian society. This tradition continues with the VA loan program, which is designed to help veterans and military service members obtain mortgages, often with better terms than they would have been able to get otherwise.

With increasingly more service members expected to return from Iraq in the months ahead, the assistance offered by VA loans could be especially timely--not just for these returning service members and recent veterans, but also for the housing market in general. At a time when that market is slumping and fewer prospective buyers qualify for mortgages under stiffened lending standards, the VA loan program should help bolster housing demand.

 

Who is Eligible?

Eligibility for a VA loan depends primarily on two factors:
  • Military service
  • The purpose of the loan
  Requirements for military service vary, but for the most part eligibility is possible for anyone who served in the United States Armed Forces at anytime from September 16, 1940 onward, and who did not leave the military under a dishonorable discharge. There are length of service requirements which vary; in general, less service is required for people who served in time of conflict. Spouses of service members may qualify for a VA loan if the service member was killed or is missing in action, and the surviving spouse has not remarried.

 

One important point about eligibility: while this is referred to as the VA loan program and is administered through the Department of Veterans Affairs, in this context the definition of "veteran" extends to people still serving in the military, as long as they have met the relevant service criteria.

 

Regarding the purpose of the loan, VA loans are for the purchase or repair of a home which will serve as the borrower's primary residence. The borrower must meet lender income and credit criteria, and a VA loan will not be made in an amount exceeding the appraised value of the property.

 

What the VA Loan Program Does

The VA loan program guarantees a portion of a mortgage made to a qualified veteran or service member. The VA itself does not make the loan, but by guaranteeing a portion of the loan, they allow lenders to offer some or all of the following:
  • Mortgage credit to borrowers who otherwise might not qualify
  • Interest rates which may be lower than for non-guaranteed loans
  • Mortgages with little or no money down
VA loans are made by private lenders such as banks, savings and loan associations, or mortgage companies. Borrowers apply to a lender, and then the VA guarantee becomes effective when the loan is closed. Because VA loans are freely available in the marketplace rather than through a single provider, borrowers can shop around to obtain the best terms.

 

Certificate of Eligibility

VA loans are designed to cover wide variety of situations, which is good for eligible borrowers, but can make the eligibility requirements confusing. However, prospective borrowers can find out in advance if they are qualified by obtaining a Certificate of Eligibility. This can be obtained by contacting the Veterans Administration. Also, most lenders now have access to an automated system which can determine eligibility.

 

The VA loan program is designed to give something back to people who have served their country. In return, given the state of the housing market, those people may be able to give something back to the U.S. economy.


About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.

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