Ever wonder where a VA Loan comes from?
Or why you should care?
It’s no doubt to professionals that a VA home loan is a great benefit to every VA eligible borrower who qualifies, but many people do not completely understand why. VA Loans don’t actually come from the U.S. Department of Veterans Affairs (VA)? The VA is responsible for establishing guidelines for veterans’ mortgages, but private lenders fund the loans often with 100% financing and no private mortgage insurance. PMI (private mortgage insurance) can range from $55 – $300 a month or more.
VA eligible borrowers are responsible to arrange financing through typical lenders of their choice. The Veterans Administration puts rules in force for Appraisers. Appraisers have to be certified to perform a VA appraisal because the VA requirements are put in place to protect the borrower and the lender. If the risk is low enough, the VA will provide its guaranty on the loan, protecting the lender against loss of principal in case of default.
In 1944 the Servicemen’s Readjustment Act was passed which provided a wide variety of benefits to eligible veterans.
In 1970, the President signed into law the Veteran’s Housing Act which greatly expanded the availability of the VA Home Loan Program and removed all expiration dates for applying for VA loans. The change meant that the entitled serviceman or woman, veteran, or other eligible person’s benefits will not expire. There have been other changes added which have broadened the availability and improved the program over the last 40+ years. The VA does play an important part in every VA Loan – it provides private lenders with a guaranty to back a portion of each VA Loan. Plain English – if the borrower has a foreclosure the VA will pay a percentage of the loan back.
VA loans are a wonderful opportunity for those who have served in the military. Any competent, experienced real estate agent can help you through the process. If you find yourself talking to a Realtor or a Lender and they are steering you away from a VA Loan, there should be a very good reason. Many people will say they are ‘hard to get’ or ‘difficult to qualify for’. That is normally a statement that comes from the mouth of someone who is not experienced in the process.