Pros And Cons Of A Va Home Loan

A VA home loan must be used to finance your personal residence within the United States or its territories, but you have many choices regarding the type of home you purchase.

    * Existing single family home.
    * Townhouse or condo in a VA-approved project.
    * New construction residence.
    * A manufactured home and/or lot.
    * Home refinances. Certain types of home improvements.

What's the Maximum Amount I Can Borrow?

There is no set maximum for a VA loan, but lenders usually limit it to an amount that can be sold on the secondary market.

What is a Funding Fee?

A fee of two percent of the loan amount (2.75 percent for Reservists) is payable when the VA loan closes your loan, and can be included in the loan.

The fee is reduced if the veteran makes a downpayment of at least 5 percent.

Can I Get a Second VA Loan?

Yes. If your previous loan was made under previous entitlement guidelines, you may be eligible for an additional amount based on today's increased figures, even if the loan has not been paid in full.

Or, your entire entitlement may be restored to purchase another home:

    * If the property has been sold and the loan paid in full, or if you have repaid the prior loan and still own the property.

    * If a qualified veteran assumes your loan and agrees to substitute his or her entitlement for yours.

What Are the Benefits of a VA Loan?

    * 100% financing, no down payment loans are common.
    * No Private Mortgage Insurance (PMI).
    * No penalties if you prepay the loan.
    * Competitive interest rates.
    * Loan qualification is sometimes easier than if you were applying for a conventional loan.
    * Sellers can pay all closing costs.

What Are the Negatives of a VA Loan?

    * VA loans made prior to March 1, 1988, can be assumed with no qualifying of the new buyer. If a buyer of such a property defaults, the veteran homeowner may be liable for funds.

    * Some sellers may be hesitant to work with someone who is acquiring a VA loan because of their past reputation of taking longer to process than conventional loans. While the time may still be a little longer, getting a VA loan is not the lengthy ordeal it once was.

    * Sellers are often asked to pay a portion of closing costs, so they may not be eager to negotiate the sales price of the home.

The Veterans Administration Web site is an excellent resource for detailed information about VA guaranteed home loans. If you cannot find the answers to all of your questions there, be sure to contact your local or regional VA office.