Greetings from the VA Loan Experts!
As a veteran, you deserve the best of everything, and that includes the best home loan that the VA can offer. The VA loan is one of the most attractive mortgage options available, thanks in no small part to the guarantee it offers to eligible veterans. But what exactly is a VA loan guarantee, and how does it work?
At VA Loan Desk, we are dedicated to providing comprehensive information about VA loans to veterans, active-duty service members, and their families. With that in mind, we have put together this guide to answer one of the most commonly asked questions about VA loans: Is a VA loan guaranteed? Read on to find out!
What is a VA Loan Guarantee?
A VA loan guarantee is a promise from the Department of Veterans Affairs to cover a portion of the loan if the borrower defaults. In other words, if you as a borrower are unable to repay your VA loan, the VA will step in and pay a portion of your lender’s losses.
This guarantee is attractive to lenders because it reduces their risk, allowing them to offer favorable terms and interest rates to borrowers. For you as a borrower, it means you can get approved for a home loan with more lenient credit and income requirements than conventional loans, with little or no down payment required.
However, a VA loan guarantee does not mean that you are guaranteed to get a VA loan. You still need to meet certain eligibility requirements and undergo a credit check and other underwriting procedures to be approved.
VA Loan Guarantee Amounts
The amount of the VA loan guarantee depends on several factors, including the loan amount and the borrower’s entitlement. For most eligible borrowers, the VA will guarantee up to 25% of the loan amount, up to the Freddie Mac conforming loan limit for their county.
However, in certain high-cost areas, the VA will guarantee a higher percentage of the loan amount, up to 25% of the Freddie Mac conforming loan limit in that area. For example, the VA loan limit for a single-family home in some parts of California is $1,094,625, meaning the VA would guarantee up to $273,656 of a loan in that area.
VA Funding Fee
To help cover the cost of the VA loan guarantee program, the VA charges a funding fee. This fee varies depending on the length of your service, your down payment amount, and whether it’s your first or subsequent use of the VA loan program.
However, the funding fee can be rolled into your loan amount, meaning you can finance it over the life of your loan rather than paying it upfront.
What is a VA Loan Certificate of Eligibility?
To apply for a VA loan, you will need a VA Loan Certificate of Eligibility (COE). This document verifies that you meet the minimum service requirements for a VA loan and that you are eligible to receive a VA loan guarantee.
You can obtain your VA Loan COE through the VA’s eBenefits portal or by contacting your VA-approved lender.
Who is Eligible for a VA Loan Guarantee?
To be eligible for a VA loan guarantee, you must meet the following service requirements:
Service Type |
Minimum Service Requirement |
|---|---|
Active Duty |
90 continuous days of service during wartime or 181 days of continuous service during peacetime |
National Guard or Reserve |
At least 6 years of service, unless discharged for a service-connected disability |
Veterans |
Honorable discharge after a minimum of 90 continuous days of service during wartime, or 181 days during peacetime |
Can You Lose Your VA Loan Guarantee?
While a VA loan guarantee covers a portion of your loan in the event of default, it does not absolve you of your obligation to repay the loan. If you default on your VA loan, the VA may foreclose on the property and take steps to collect the remaining amount.
In addition, your VA loan guarantee can be revoked if you sell the property or refinance your VA loan with a non-VA loan. This means that if you want to use your VA loan guarantee again in the future, you will need to reapply and obtain a new COE.
FAQs about VA Loan Guaranteed
1. What are the benefits of a VA loan guarantee?
VA loan guarantee makes it possible for eligible veterans to purchase a home with little or no down payment, at a competitive interest rate. It also offers more lenient credit and income requirements than conventional loans and reduces lenders’ risks, making them more willing to offer favorable terms and interest rates.
2. Who is eligible for a VA loan guarantee?
Generally, active-duty service members, veterans, and National Guard/Reserve members who meet minimum service requirements are eligible for a VA loan guarantee.
3. What is a VA loan funding fee?
The VA charges a funding fee to help cover the cost of the loan guarantee program. The fee varies depending on your length of service, down payment amount, and whether it’s your first or subsequent use of the VA loan program.
4. How do I obtain a VA Loan COE?
You can obtain your VA Loan COE through the VA’s eBenefits portal or by contacting your VA-approved lender.
5. Can I lose my VA loan guarantee?
Your VA loan guarantee can be revoked if you sell the property or refinance your VA loan with a non-VA loan. If you default on your VA loan, the VA may foreclose on the property and take steps to collect the remaining amount.
6. How much of a VA loan is guaranteed?
For most eligible borrowers, the VA will guarantee up to 25% of the loan amount, up to the Freddie Mac conforming loan limit for their county. However, in certain high-cost areas, the VA will guarantee a higher percentage of the loan amount, up to 25% of the Freddie Mac conforming loan limit in that area.
7. What is the difference between a VA loan guarantee and a VA loan?
A VA loan guarantee is a promise from the VA to cover a portion of the loan if the borrower defaults. A VA loan is a mortgage loan made by private lenders but backed by the VA through the loan guarantee program.
8. How long does it take to get approved for a VA loan?
VA loan approval times can vary depending on the lender’s workload, your creditworthiness, and other factors. However, it typically takes about 30 days or less to get approved for a VA loan.
9. Can I use a VA loan to buy a second home?
No. The VA loan program is intended to help eligible veterans purchase their primary residence.
10. How much do I need to put down for a VA loan?
You do not need to put any money down to get a VA loan, although doing so can lower your monthly payments and interest rates.
11. Can I use a VA loan to refinance an existing mortgage?
Yes, you can refinance an existing mortgage with a VA loan through the VA’s Interest Rate Reduction Refinance Loan (IRRRL) program.
12. Can I use a VA loan to buy a condo?
Yes, as long as the condo is on the VA-approved condo list.
13. Can I use a VA loan to buy a manufactured home?
Yes, as long as it meets the VA’s minimum property requirements and is classified as real property.
Conclusion
If you are an eligible veteran or service member, a VA loan guarantee can provide an excellent option for purchasing a home with favorable terms and interest rates. However, it’s important to understand that a VA loan guarantee does not mean you are guaranteed to get a VA loan or that you are absolved of your obligation to repay the loan.
If you have further questions about VA loan guarantees, qualifications, or the application process, contact your VA-approved lender, or visit the VA’s website for more information.
Contact Us for more information!
If you are interested in learning more about VA loans, including whether you qualify and how to apply, contact the experts at VA Loan Desk. Our knowledgeable and experienced team is dedicated to helping veterans, active-duty service members, and their families get the best possible mortgage options.
Closing/Disclaimer
VA Loan Desk is a private company not affiliated with the Department of Veterans Affairs or any government agency. We provide information and assistance to veterans, active-duty service members, and their families regarding VA home loans. Any information provided by VA Loan Desk is for informational purposes only and should not be considered legal or financial advice. The VA Loan Desk team encourages all borrowers to consult with their respective qualified tax, legal, and financial professionals before making any decision concerning a VA loan.