Prospective homebuyers who are active duty military or who served in the military and received an honorable discharge would be wise to investigate VA loans or the Veterans Administration Loan Guaranty Service, before taking out a conventional loan. While the VA only makes loans to individuals in rare cases, its guaranty program is available through most banks and lending institutions to all qualified veterans. VA loans may also be available to the unremarried spouses of veterans who died while in service and to the spouses of POWs and MIAs.

Advantages of VA Loans

There are several advantages of VA loans over conventional loans. Number one and possibly most helpful to first time homebuyers is that those who are eligible for a VA loan are generally not required to make a down payment. Because the VA guarantees that they will repay the lender if the veteran defaults on the loan, PMI is not required. PMI is Private Mortgage Insurance and increases the homebuyer’s monthly payment. VA loans generally have a fixed rather than adjustable interest rate, which allows for easier budgeting over time, since the monthly payment will not change. The VA limits the amount of closing costs a lender may charge a borrower. Other advantages include the extension of leniency to VA homeowners who are experiencing temporary financial difficulty.

Some Common Misconceptions

Possibly, because it is called a guaranty service or because the VA sends its own inspectors to estimate the reasonable value of the property, some veteran home owners have tried to hold the VA responsible for defects in their homes. The VA inspector is not “guaranteeing” the condition of the home; however he may be able to help the homebuyer negotiate correction of complaints related to new construction. If a home builder is completely unsatisfactory, the VA may be able to suspend the builder from participation in the VA Loan Guaranty program. In addition the VA does not provide legal services to veterans.

Certificate of Eligibility

Veterans may obtain a certificate of eligibility directly from the Veterans Administration. VA Form 26-1880 must be completed and submitted to a VA Eligibility Center along with acceptable proof of service, such as discharge papers. The Certificate of Eligibility does not guarantee that the veteran will qualify for a loan. He or she must still pass the lender’s credit and income requirements. More information and guidelines are available at www.va.gov in the benefits section.