VA stands for the Veterans Administration, or Veterans Affairs, is a loan benefit for qualifying veterans. Now there are programs available for qualifying spouses and families in certain tragic circumstances, those killed in action and some other things.
The VA guarantee right now is $104,250 or 25% of the Freddie Mac loan limit. So what that means here, we’re talking about a guarantee, which is similar to the idea of having loan insurance, but the VA instead provides a guarantee to qualifying lenders. So in that case here, the veteran owning and occupying the home as a resident. So this is not an investment vehicle.
A VA loan requires a certain type of appraisal that assures the value of the properties in place, and the veteran has to own and occupy the home as a resident. So this is not a loan program, for example, to buy investment properties. A veteran, but even a non-veteran, might purchase a home together. That probably is not a big surprise as spouses and the like. One of the most important developments or documents around this is that, the veteran needs their certificate of eligibility to qualify. And the certificate of eligibility simply probably states what you can imagine it says, that they’re eligible for such a loan program. Among other things that requires certain discharge from the military. Any military branch- Coast Guard, Marines, anything in between, would qualify for such a this. But they’ve got to have this certificate. There are organizations, banks, lenders, who are really used to and accustomed to working with the VA and lending to take the pressure away from and the stress away from the veteran, him or herself. Nevertheless, experienced lenders can help walk us through this. Closing costs may not be included in veteran loans, though. They must be paid in cash at closing. The seller can pay those. The buyer can pay those. Remember, the seller can pay closing costs as a function of just increasing the price as long as it doesn’t distort what the real property value is. But there are ways to negotiate how we get closing costs paid in cash without necessarily increasing cash requirements to the buyer at closing. Nevertheless, those need to be paid for in cash if the borrower is using a veteran loan, a VA loan.
Now, the original borrowers to a VA loan, if for example I’m the borrower and a veteran, I would be responsible for the loan until it’s paid off. A VA loan, just like an FHA loan, Has no due on sale clause. So among other things, it’s assumable. It makes it a great tool. And not only that, it’s assumable by a non-veteran. And so if we have a substitution of entitlement, From a cooperating buyer, then our first veteran or the first borrower might be relieved from its obligation on the loan. Otherwise, there’s only one VA loan at a time that can be outstanding, whether it’s in my possession or it’s been assumed by another party, before I, the veteran, could qualify for another.
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Shirin Rezania Ramos | 858.345.0685 | www.shirinramos.com | Compass, DRE 0203379
