Tuesday, June 19, 2012

Mortgage Options For Veterans

By Jackie Lohrey

One important benefit available to U.S. military veterans can make the dream of home ownership come true. As part of the Servicemen's Readjustment Act of 1944, more commonly called the GI Bill of Rights, eligible veterans of any branch of service can apply for a VA guaranteed loan. The Veterans Administration works in partnership with a variety of private lenders to administer mortgage options for veterans.

The VA provides a mortgage option for veterans that guarantees, rather than provides, loan funds. This reduces much of the perceived risk your loan application poses to a private lender and increases your chance of approval. This also allows you to qualify for better interest rates and better terms on the loan.

Getting a VA loan does not mean the home you purchase must fall within a specific dollar amount. However, the VA does place limits on the amount of insurance it provides. As 2011, the maximum amount of loan insurance the VA will provide is $104,250 or 25 percent of the value of your home, up to a purchase price of $417,000. In addition, if you live in an area the VA deems a "high-cost county," the VA will provide loan insurance of 25 percent on a higher purchase price. For example, as of 2011, according to the U.S. Department of Veterans Affairs, if you live in Orange County, California, the VA will insure your loan up to a purchase price of $700,000, while if you live in Nantucket County, Massachusetts, the amount increases to $1,094,625.

The VA must first verify that you are eligible, and then provide a certificate of eligibility before you can apply for a VA loan guarantee. In addition to veterans, eligibility may extend to active duty military, members of the Reserves and National Guard and in some cases surviving spouses. You can start the verification process by applying for a certificate online, by mail or through your lender.

Compared to a conventional mortgage loan, VA debt-to-income ratio requirements are much less strict. For example, to qualify for a VA loan, the total of your monthly housing expenses and all recurring monthly debt such as car, personal and student loans, as well as credit card payments cannot be more than 41 percent of your gross monthly income. In contrast, a conventional loan requires a percentage of not more than 36 percent. In addition, conventional loans generally require the total of your monthly housing expenses alone not be more than 26 percent of your gross monthly income. If you have no previous credit, a VA loan will consider rent, utility and phone bill payments to establish acceptable credit. If you have past credit issues, the VA will generally work with you unless these issues involve any form of past-due federal debt, such as tax liens or a delinquent student loan.


http://www.lenderva.com

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