by Donna Burt

Created on: November 13, 2008

When the time has come to purchase a home, potential buyers may be introduced to several loan programs. One such program is a VA loan. Created for veterans and signed into law as part of the original GI Bill of Rights in 1944, VA financing offers excellent options including no down payment and assumability under certain terms. Another great thing about VA home financing is the ability to use the program for homes currently built, construction loans or mobile home financing.

With this in mind, VA financing offers current market interest rates while allowing less restrictive credit and income criteria than standard conventional loan programs. In addition to allowing 100% financing, a VA loan also allows the seller or lender to pay up to 4% of a borrower's closing costs and requires no mortgage insurance. VA loans are also the only loan program that restricts what closing costs a veteran is allowed to pay.

While considering VA financing, there are two primary requirements that must be considered. The first being eligibility and the second requires the home be purchased to occupy as a primary residence. The only exception to the primary residence requirement is someone on active duty that is deployed overseas. In this case they may still purchase the home for the use of their spouse, but must sign a statement of intent to occupy it upon their return.

The second requirement, eligibility, is determined by the VA and varies based on how, when and the length of service. Factors in determining eligibility include those currently serving and veterans that received an honorable discharge and served on active duty from 90 days to two years, depending on the year of entry. Reservist and National Guard members never called to active duty have different factors for determining eligibility.

The first step in acquiring a VA home loan is to locate an approved lender. The Department of Veterans' Affairs does not provide financing, rather delegates this authority to approved lenders. It is important to select a lender that has a "LAPP" designation; otherwise, a veteran could find themselves dealing with more than one company during the process.

While the lender will advise a borrower on the paperwork required, the document that determines eligibility can sometimes be acquired via the internet by the lender. If not available on-line, obtaining a "certificate of eligibility" simply requires the borrower to sign a form and provide a copy of their DD214 (those discharged) or a statement of service (those still in the service) in which the lender will use to obtain it from VA.

With recent changes concerning eligibility, under certain circumstances, a veteran or active duty service member may be able to use their eligibility to purchase a new home even if they still own a home with VA financing. Prior to this change, purchasing a home using VA eligibility usually restricted the availability of use to one time.

While offering such great benefits, a VA loan is a great way to finance a new home and with a pro-military service position, provides an excellent source for financing the transaction.

Learn more about this author, Donna Burt.
Click here to send this author comments or questions.