Salem County Veterans Corner: What is a VA guaranteed loan?

By Joseph Hannagan Jr.

Veterans Administration-guaranteed loans are made by private lenders, such as banks, credit unions or Mortgage companies to eligible veterans for the purchase of a home, which must be their own personal occupancy.

Veterans apply for a loan through a lender and if the loan is approved the VA guarantees a portion of the total loan. VA’s guarantee allows the veteran to obtain a competitive interest rate without a down payment. The amount of the loan a veteran can be approved for depends on the property location and entitlement available, as well as credit and income factors.

VA loans offer these important features:

• Equal opportunity for all qualified veterans

• Buyer informed of reasonable value

• No down payment

• Closing cost are comparable and may be lower

• Negotiable interest rate

• No mortgage insurance premiums

• An assumable mortgage

• Right to repay without penalty

•  For homes inspected by VA during construction, a warranty will be issued to obtain cooperation from builder

• VA assistance to veterans borrowers in default due to temporary financial difficulties

The VA does not do the following:

• Guarantee that a home is free of defects. VA only guarantees the loan. It is the veterans’ responsibility to assure that they are satisfied with property being purchased

• If you have a home built, VA cannot compel the builder to correct construction defects although VA does have the authority to suspend a builder from further participation in the home loan program

• VA cannot guarantee that the veteran is making a good investment

• VA cannot provide a veteran with legal services

How does a veteran obtain a VA guaranteed loan?

• Contract to Purchase:  Select a home and negotiate the purchase with the seller or agent and sign a purchase contract conditioned on approval of a VA Loan

• Loan Application: Select lender and present your military “Certificate of Eligibility” and complete the loan application. Lender will develop all credit information and request the VA to assign a licensed appraiser to determine reasonable value for the property.

• Loan Decision: If the established value is acceptable to all parties and the lender develops that a veteran is credit and income qualified, the loan may be approved

• Loan Closing: veteran and spouse attend the loan closing and sign the note, mortgage and other related papers. The lender will explain the loan terms and requirements. When the loan is reported to the VA, the Certificate of Eligibility is annotated to reflect the use of entitlement and returned to the applicant.

For more information call the VA at 1-888-244-6711 or visit the Salem County Veterans Service Office in the Fifth Street Complex, 110 Fifth St., Salem.

Joseph Hannagan Jr. is Salem County Veterans Affairs Officer. Veterans can contact Hannagan at his office by calling 856-339-8603, via cell phone at 609-774-7450 or via email at [email protected]