Notes

VA loans typically require no down payments and have limits on the amount of closing costs that can be charged to the borrower. There are, however, certain drawbacks to the loans, among which are funding fees that are charged to veterans and will, if factored into the loan, extend to the life of the loan with no hope of them "dropping off" as do conventional loan insurances. The fact that only fixed and adjustable rate mortgage loans are available is another drawback as many people need and want more flexible loans than VA currently offers.


Because of this feature, most lenders will not loan more than $417,000 (of which $104,250 is 25 percent) to any veteran seeking an average or normal VA loan.
. The loans are principally for discharged military personnel with wartime service of a specified duration or certain peacetime service, active-duty personnel, and reservists with six years in the reserves or National Guard.

A veteran and his or her spouse (including a common law spouse) may cosign a guaranteed loan together. However, an unmarried partner who is a co-borrower with a veteran may not have his or her portion of the loan amount guaranteed by the VA. Several borrowers who are all veterans, whether or not they are related, may purchase a one- to four-family home they intend to occupy as owners, but they are limited by the maximum guarantee amounts.
Obtaining a VA loan requires a certificate of eligibility, which only the VA may issue. These certificates must be obtained each time the veteran:
Applies for a loan
Applies to have the entitlement restored
Applies to refinance the current VA loan

The VA has no housing expense qualifying ratio; only the total debt service ratio is considered, and it must not, like in FHA qualifications, exceed 41 percent. The VA sets certain standards for determining whether a veteran meets this requirement.
As noted, the VA guarantees only a portion of the total loan amount, based on the size of the loan and the amount of other guarantees the veteran has outstanding. The amount the VA will guarantee is known as a veteran's entitlement. A lender is typically willing to make a loan of four times a veteran's entitlement (if there is no down payment), or four times the sum of the entitlement and the down payment.
Note
The percentage and dollar amounts of the loan guarantee include the VA funding fee if it is financed in with the loan. No other fees may be financed, unless the veteran is refinancing an existing loan. For the purpose of the examples in this lesson, it is assumed that the funding fee is not financed, unless otherwise stated.

A veteran's remaining entitlement can be "restored" to the veteran under certain conditions. First, if the original VA loan amount is repaid in full or the loan is assumed by another eligible veteran, the first veteran may apply to have the entitlement restored and to be treated as though the veteran never used the entitlement for the purpose of a new loan. The entitlement cannot be restored if the property it was used for has not been sold, except for one time in the veteran's life.

For a loan to be approved by the VA, the property to be purchased must be appraised by an approved VA appraiser. A lender requests a VA appraisal by filling out the appropriate VA form and submitting it to the nearest Veterans Affairs office. The appraisal process results in a certificate of reasonable value (CRV) (the equivalent of a VA appraisal). VA loans are made on the basis of the value determined by the CRV and any amount of the sale price in excess of this must be paid by the borrower as a down payment with personal funds. The veteran who buys such a property must also sign a statement acknowledging the price being paid is above the reasonable value as determined by the VA.

The funding fee is a fee charged by the VA for the loan guarantee. For certain loans, like those for disabled veterans, it may be waived entirely. This fee can be folded into the loan and financed. The funding fee for first time users with zero down payment is 2.15% of the loan amount.

In order to process loans, not a small amount of paperwork and man hours are needed. For this service, a loan origination fee is charged, usually by the lender. It usually amounts to one percent of the loaned amount. This fee cannot be financed, and must be paid up front.

VA loans can be assumed, even by those who are not veterans. In order for this to happen, the buyer, any person wishing to assume the loan, has to pay assumption or transfer fees to the VA. Once approved and the assumption completed, the seller becomes freed (novated) from the obligation of the VA loan, and the buyer assumes it.
Interest rates for VA loans, like other types of loans, vary depending upon current market trends, conditions and borrower factors. The actual rate will be negotiated between the borrower and lender.