The VA Loan Guarantee Process

The VA Loan Guarantee Process

By Leesa Sandoval March 08, 2010

First, the veteran must apply for a VA guaranteed loan with a  lender who offers VA financing.  If approved, the VA will guarantee a certain amount of the loan amount to the lender.

This means that if the borrower defaults on the loan the lender will be repaid the guaranteed amount, and they can generally make up the remainder of the loan amount through the sale of the property in foreclosure. This makes VA loans much less risky and allows lenders to offer more favorable terms to those who qualify.

Qualified VA borrowers can often obtain financing with no down payment. $36,000 is the maximum entitlement, or amount the VA will guaranty, for a loan up to $144,000. For loans over this amount, it can go as high as $104,250.

A Few Benefits Of VA Loans:

• Any qualified veteran or current military personnel has equal opportunity to be given a VA loan.
• 100% financing is often available.
• VA will assist borrowers in case of default due to financial difficulty.
• The VA funding fee can be financed into the loan amount.
• Closing costs comparable to other financing types.
• Mortgages are assumable.
• Ability to prepay without being penalized.
• For houses appraised by the VA during construction, builder-provided warranty and help from the VA in acquiring builder cooperation.
• No mortgage insurance required.

However, the VA does not:

• Promise that a home is defect-free; only the loan is guaranteed by the VA.
• Order a builder to fix defects in your home if you had a house built.
• Guarantee that a veteran is making a good investment.
• Provide veterans with legal services.