VA loans are in place for two reasons. One is to help qualified veterans finance homes in regions where financing of the private variety is not available. This could be a number of different areas, including small cities or towns that are not located near metropolitan cities. The other reason is to help qualified veterans with down payments. VA loans offer additional benefits that are not offered from conventional loans.
Some of these VA loan benefits include:
- 100% financing for purchasing and refinancing. As of 2009, loans in amounts up to $417,000 were possible. In areas where the cost of living is higher, or real estate markets are inflated, the maximum loan amount could be increased. San Diego is considered to be one of these areas. The states of Hawaii and Alaska are two other examples.
- PMI, Private Mortgage Insurance, is not required. Conventional lenders require this insurance to be purchased for their protection. It works to offset losses should the borrower default on the loan and the lender not be able to recover the investment made after foreclosure.
- Highly competitive and fixed interest rates.
- VA loans are assumable. Homes can be sold to non-veterans. Purchasers of these homes can then take advantage of these loan benefits.
- The federal government can choose to extend leniency in the case that the veteran is going through a period of financial hardship.
- VA loans come with no penalty for prepayment. Borrowers can pay their loan in full without incurring any additional costs.
- When compared to conventional loans, the credit and income requirements associated with VA loans tend to be much easier to meet.
- When selling to veterans, new home builders are required to provide a one year warranty to cover any conflicts between the construction and VA specifications. There will also be a four year period in which structural problems that affect livability will be covered in the form of compensation for repairs. Any defects should be examined by a qualified home inspector.
- Borrowers will not be charged any fees or incur any costs that the VA does not feel are appropriate.
- The down payment amount may be completely financed. However, closing costs and applicable funding fees will still need to be paid upfront.
- In the state of California, additional funding in the form of Cal-Vet loans may be available. Those who have paid off previous Cal-Vet loans, or had their home destroyed by a natural disaster, may qualify for subsequent Cal-Vet loans.
Determining Eligibility for VA Loans
In San Diego, borrowers will need to receive a Certificate of Eligibility. VA Form 26-1880 will need to be completed and submitted in order to apply. Veterans, those who are on active-duty, military spouses, and guard or reserve members may qualify. Time spent in the service will need to meet the minimum designated duration. While the certificate does not guarantee that one will be approved for a loan, it is the first step in the process. The certificate will provide the amount that one is entitled to. This will be the amount that the government guarantees for the service person.
