VA Loan Basics

August 6, 2022
by Charlie Priest

A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). VA loans can be very helpful for veterans

Like FHA loans, VA loans are backed by the federal government in order to protect lenders against default, an assurance that removes barriers to home buying for prospective homeowners when they attempt to get a mortgage. This loan guarantee has its origins in the Servicemen’s Readjustment Act (more commonly known as the G.I. Bill), passed by U.S. Congress in 1944 to provide a wide range of benefits for soldiers returning from WWII. Eligibility for VA loans – as well as unemployment compensation, vocational training, and other offerings of the G.I. Bill – have since been made available to veterans of subsequent wars and peacetime service.

VA loans serve two primary purposes:

  • to finance loans for eligible veterans in regions where private financing is not available, which are generally rural areas, and small cities and towns far from metropolitan and commuting areas of large cities; and
  • to help eligible veterans who lack sufficient funds for a down payment to purchase properties.

VA loans offer eligible veterans a number of benefits that are not available to recipients of conventional loans. Note that not all of the following features are available to those receiving FHA loans. VA loan benefits include:

  • 100% financing on purchases and refinances. Loans are available up to $417,000 (as of 2009), although this amount is higher in some areas with a higher cost of living and/or inflated real estate markets, such as Hawaii, Alaska and California;
  • no Private Mortgage Insurance (PMI). PMI is money paid to a lender to offset losses in the event that the borrower defaults and the lender cannot recover its investment after foreclosure;
  • fixed, competitive interest rates;
  • the loan is assumable, meaning that borrowers can sell their homes to non-veterans and pass along the benefits of the VA loan to the buyers;
  • forbearance, in which the federal government can extend leniency to veterans experiencing temporary financial hardship;
  • no prepayment penalty. Penalties are applied to conventional loans when borrowers choose to pay off their mortgages early, which then gives them the option of refinancing at a lower interest rate;
  • easy credit and low income standards, compared with conventional loans;
  • the builder of a new home is required to give the purchasing veteran a one-year warranty, protecting the borrower against construction that conflicts with VA-approved specifications. Also, the VA will compensate the borrower for correction of structural defects in the home within four years of the loan guarantee if the defects seriously affect livability. 
  • the borrower may be charged only the fees and other costs that the VA considers appropriate;
  • the down payment may be financed. Closing costs and funding fees still apply, however; and
  • in California, veterans may be eligible to receive additional benefits from a Cal-Vet Home Loan, such as reusability (you can receive a new Cal-Vet loan whenever you purchase a property as long as you have paid off previous Cal-Vet loans), and earthquake, fire and mudslide protection plans.
In order to be eligible for a VA home loan, the borrower must obtain a Certificate of Eligibility by completing the VA Form 26-1880. Veterans, active-duty, guard, reserve, and military spouses potentially qualify for this certificate. Veterans and active military personnel need to have served for a designated duration, depending on war- or peacetime, in order to be considered eligible. The certificate states the entitlement amount, which is the portion of mortgage that the VA will guarantee for each serviceperson. Keep in mind that the Certificate of Eligibility, while necessary for the loan process, only allows an eligible individual to apply for a home loan, but it does not guarantee loan approval.
In summary, VA loans offer eligible veterans a variety of benefits that are not available to recipients of conventional or even FHA loans.

Why Homeowners Often Avoid Inspections

Home inspections are a critical part of the home buying and selling process, providing valuable insights into a property's condition and potential issues. Some homeowners may choose to avoid inspections for various reasons. By understanding these factors, both buyers...

The Importance of Using a Line Voltage Indicator (Wiggy) in Home Inspections

When it comes to home inspections, ensuring safety is paramount. Among the many tools and devices utilized during the inspection process, the line voltage indicator, commonly known as a "Wiggy," plays a crucial role. Tennessee Inspection Services recognizes the...

Pinless vs. Pinned Moisture Meters: Choosing the Right Tool for Effective Home Inspections by Tennessee Inspection Services

During a home inspection, moisture meters play a vital role in identifying potential issues and evaluating the condition of a property. Tennessee Inspection Services understands the significance of moisture meters and utilizes them to enhance the accuracy of their...

Types of Pests That You Need to Keep Out of Your Home

Keeping pests out of your home is essential for maintaining a safe and comfortable living environment. Certain pests pose significant risks, ranging from health concerns to structural damage. Understanding the types of pests that can infiltrate your home and taking...

Pests To Be On The Lookout For When Buying Or Selling A Home

In the realm of home buying and selling, one of the major concerns is pests. These tiny invaders can cause significant damage to the property, degrade its value, and even create health risks. Comprehensive pest inspections are a crucial step in safeguarding your...

The Importance of Using Insulated Screwdrivers During Home Inspections

When it comes to conducting a thorough and safe home inspection, attention to detail is crucial. As a professional home inspector at Tennessee Inspection Services, we understand the importance of using the right tools for the job. In this blog post, we will discuss...

What You Can Do About Fire Risk in Your Home

We offer certified inspections for residential and commercial properties to both buyers and sellers. We emphasize the significance of fire safety in your home and provide measures to decrease fire risk and create a safer living environment. Ensure Electrical Safety...

The Consequences of Having Small Gaps in Your Roof

The integrity of your roof is critical for the overall protection of your home. Small gaps may seem insignificant but can lead to significant problems over time, including water leaks, pest infestations, and energy inefficiency. Understanding these potential issues...

The Crucial Role of Gas Leak Detectors in Home Inspections

Home inspections play a vital role in ensuring the safety and well-being of homeowners. Among the numerous potential hazards that need to be assessed, gas leaks pose a significant threat. Gas leak detectors are indispensable tools for Tennessee Inspection Services and...

Demystifying Outlet Testers: Understanding Their Role in Home Inspections

When it comes to ensuring the safety and functionality of your home's electrical system, outlet testers play a vital role. During home inspections, these simple yet powerful devices are used to assess the condition of electrical outlets and detect potential issues. In...

Read Also

Let’s Talk About Your Inspection

Send Us an Email

charlie@tninspectionservices.com

Call Us

731-207-0601

Contact Us