Members of the armed forces who are in active duty, National Guards, reservists, and their spouses, can avail of the HLG (Home Loan Guaranty) program offered by the Department of Veteran Affairs (VA). This program has been there since 1944 and has been allowing members to access financial assistance and other related benefits as needed.
More or less than 20 million VA members have already enjoyed the benefits offered by this program. VA statistics show that more than half of all who applied for this type of loan signified their intent to use the money for purposes such as buying, repairing, and improving their homes. There are also members who used the money granted to them as a way to refinance their existing home loans.
It is the federal government who puts a guarantee on an individual’s loan taken from usual lending service providers like private banks, specialized lending companies, and credit unions. As stated in the VA Home Loan Program, it is the member who must first make arrangements with these lending entities before the government can step in and guarantee anything.
After the process of property appraisal which will be done by the government, a guarantee on the loss of percentage on the loan principal is granted. Of course, this is if the member can pass all the requirements as stated in the evaluation results gathered in by the government.
Options for Those Who Are Interested in the VA Home Loan Program
There are many ways on which money from the VA Home Loan Program can be used. These include the following:
- Purchase of new house;
- Construction of a house;
- Purchase of condominiums or housing units from cooperatives;
- Purchase of remanufactured house and lot;
- Develop (expand, renovate, etc.) a veteran’s house; and
- Install or repair HVAC systems inside a veteran’s house.
A member can apply for a loan amount that covers the whole cost of a house to be purchased. As much as 25% (maximum of $104,250) of the loan principal can be guaranteed under the VA Home Loan Program. This means that a maximum loanable amount is $$417,000. However, this is for selected locations only as there are locations on which the maximum amount can reach up to a million dollars. Borrowers have to pay 2 percent for the loan. There is also a 0.5 to 3 percent funding fee for applications that will be approved. Members have the option of paying these charges in cash or have it deducted from the loan amount.
Benefits to be Enjoyed by Borrowers
- In case of defaulting, the VA will shoulder a certain percentage of the loan (about 15 to 50%).
- A member is given the opportunity to buy a house without any down payment.
- Closing costs are limited.
- The PMI (Private Mortgage Insurance) can be waived off completely.
- Members enjoy low mortgage rates (in comparison with rates observed in the real estate market)
- Less strict requirement in terms of debt-income ratio.
- Prepayment penalties are waived off.
- A veteran can choose to have a seller settle his or her closing costs on the house as long as the 6% limit on the market price of the property is not exceeded.
- Qualifying for the loan through credit score is easier.
- Veterans with specific disabilities will receive special housing adaptation assistance.
- Homes can be constructed or bought even if the location is on trust lands. (The VA member must be an eligible Native American veteran).
Refinancing a Home Loan
The VA also has several programs for veterans, active service members, and their spouses wishing to refinance a home loan.
There are several more programs that are open for veterans, actively serving members of the armed forces, and their surviving spouses. These programs are intended to help them refinance a home loan. Qualified veterans can avail of the IRRRL (Interest Rate Reduction Refinance Loan). This is referred to as the Streamline Refinancing Program of the VA. Under this, members are given the chance to:
- Access low interest refinancing.
- Go from one rate option to another.
- Skip the requirement of submitting income or asset documents.
- Skip appraisal requirements.
- Enjoy minimal to zero closing costs.
- Apply for the financing of energy efficiency projects at home.
A law allowing veterans to utilize 100% of a home’s appraised value under the Cash-Out Refinancing Loan of the VA was passed in 2008. This is referred to today as the Veteran’s Benefits Improvement Act. This law expands the ways on which a veteran can use the loan amount received. These include debt consolidation, education funding, recreation, and many other similar things.
A veteran can access debt consolidation and settlement help from financial experts as needed.