You can apply for a VA Loan if you are a veteran of the US Armed Services. Before we get into the specifics of who qualifies for this loan, let’s take a brief look at what this loan means and why it was set up.

A VA Loan is a special type of loan that banks and financial institutions give to army veterans. The loan is backed by the Veterans Administration (VA), which compensates or protects the lender in the event that the borrower does not keep up with loan payments.

In a VA loan, the amount of money that is guaranteed by the Veterans Administration (VA) is referred to as an entitlement. This is the amount that the VA takes up to pay to the bank or financial institution in case the borrower fails to make payments.

Loan Amount Amount Guaranteed

Up to $144,000 $36,000

Above $144,000 $60,000

TIP: When you take out a VA Loan, you have to pay a two percent fees towards closing costs, but this can be avoided by paying a down payment of up to five percent on the loan.

Benefits of taking a VA Loan

A VA Loan was designed to help army veteran who wants to take a loan to do any of the following:

• Buy a home that they like for an investment and a place to live.

• Purchase an already constructed home or lot.

• Buy a home and at the same time make home improvements.

• Refinance for up to 90 percent of the VA-established reasonable value for a home loan.

• Refinance an existing VA loan for the benefit of taking reduced interest rates.

• Purchase a home like a townhouse or condominium unit within a housing project approved by the VA.

How do you know if you are eligible for a VA Loan?

You are eligible for a VA loan, if you have served on active duty in the army and were honorably discharged. You must have taken parts in any of the following military events, which are listed out chronologically:

• Second World War

• Korean War

• War in Vietnam

• Persian Gulf War

• Afghanistan and Iraq conflicts

You also qualify for a VA Loan, if you served in any of the armies that allied with the US during the Second World War. If you hare a surviving spouse of an army officer who passed away in the line of duty or as a result of service-connected injuries, and not remarried, you are eligible to apply for this loan. You can also apply if you are a surviving spouse of a member of the Armed Forces serving on active duty, but reported missing or listed as a POW for more than 90 days.

Steps for applying for a VA Loan

In order to proceed to apply for a VA Loan from a bank or financial institution that you have chosen, you need to have a certificate of eligibility.

Here is a brief glimpse on the steps involved in applying for a VA Loan.

Step1: Get your certificate of eligibility ready. If this is not ready, you can apply for one by filling out a VA Form 26-1880, and submit it to any VA Eligibility Center. Copies of your most recent discharge from the army and your separation papers that show when you were involved in active military duty must be attached to this form.

Step 2: Search for a home that you would like to buy and then go ahead and sign a purchase agreement.

Step 3: Apply for a VA Loan with a lender along with your certificate of eligibility ready. The lender will usually order an appraisal from VA.

Step 4: Once your loan is approved, close the loan, purchase your home and move in.

Benefits in a VA Loan

There are many ways to gain by taking a VA Loan. Here’s a look at what these are:

• One of the main benefits is a very low interest rate. No other loan can offer this to you.

• If you don’t want to make any down payment, you are free to do so in this loan type. A VA Loan comes fully financed.

• You do not have to bother with taking Private Mortgage insurance (PMI).

• Suppose you have money enough to pay off the loan, you can do so without paying any penalties for doing this.

• The loan approval process works faster.

VA Loans are applicable only for army veterans and is a good way for them to make a home investment. On the downside, some sellers may not take your offer to buy their home up because they feel a VA Loan process takes a longer time than conventional loans, which is not really true. Another issue is that many-a-time the seller has to pay a portion of the closing costs so they may not want to get into offering their home for such loan takers.