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The assistance provided is a guarantee of a portion of a mortgage loan used to finance the purchase of a primary home. Each eligible veteran (see eligibility below) is granted a dollar amount of entitlement up to a maximum of $50,750. That entitlement can be used in place of a down payment on a home, which can result in a loan for 100% of the purchase price. The maximum amount of a VA-Guaranteed loan is $203,000, thus the VA provides a 25% assistance to a purchase. The guarantee is insurance against loss from default to private lenders such as mortgage bankers, savings and loans or banks.
Persian Gulf Active military, and reservists or national guardsmen who where activated, who served at least 90 days and were discharged or deactivated honorably, are eligible. Veterans may contact any VA office or an authorized VA lender for additional information or an exact determination of their eligibility. At the present time the only VA loan available is a Fixed Rate, fully amortizing loan with a term of 10, 15, 20, 25 or 30 years. Until September 30, 1995, VA also offered an Adjustable Rate Mortgage (ARM) loan, but their authority to continue that option expired and was not renewed by Congress. The loan may be for the purchase of a new home, up to a maximum loan of $203,000 with not less than 25% guarantee entitlement ($50,750). VA loans may also be obtained for refinance on an existing home, but the entitlement available for a refinance loan is reduced to $36,000 and the maximum Loan-to-Value may not exceed 90%. No veteran may have more than one VA loan at any one time. If an existing home was purchased with a VA loan, it must be repaid in full before a new home may be purchased by reusing, or restoring, VA home loan benefits. In addition, no veteran may continue to own more than two homes that were acquired with a VA loan at any one time. For instance, if a veteran purchases a first home with a VA loan, repays that loan, purchases a second home and repays that loan in full, either the first or second home must be sold before a third home can be purchased with a VA loan. VA loans are also fully assumable by a buyer who meets all of the minimum credit qualifications required by VA. If the assuming buyer is a veteran, his/her entitlement may be substituted for the selling veteran resulting in restoration of entitlement. If the assuming buyer is not a veteran, the entitlement used to purchase the home remains with the home and is not restored. A VA loan may be used for the purchase of a 1-4 Family, detached home, or a 1-Unit home in a VA-Approved Planned Unit Development or Condominium project. All homes acquired with a VA loan must be occupied by the veteran as their primary home. Each veteran must pay a basic VA Funding Fee (VAFF) of 2.00% of the loan amount to the Department of Veterans' Affairs for the use of the program. This fee can be reduced to 1.50% with a cash down payment between 5-9.99% and to 1.25% with a cash investment of 10% or more. Eligible reservists are required to pay an additional 0.75% (2.75% total), reduced by .50% or .75% with a cash down payment as noted above. VA loans are eligible for an Interest Rate Reduction Refinance with the payment of a 0.50% VAFF. Veterans who are using their entitlement for a second or subsequent time are required to pay a VAFF of up to 3.00%, depending on their cash down payment. All Funding Fees may be added to the loan and financed or paid in cash, provided the financing of that fee does not result in a loan amount above the maximum $203,000. Certain veterans, generally those with service connected disabilities, are exempt from payment of a VA Funding Fee on all loan transactions. Other costs associated with a VA loan are those that are typical or normal for any home mortgage loan. They may include, but not limited to: No commissions, brokerage or "buyer broker" fees may be charged to a veteran buyer. Veterans seeking more information may contact any authorized lender in their area or obtain additional facts from their nearest VA regional office. Two VA Pamphlets, 26-4 {VA-Guaranteed Home Loans for Veterans) or 26-6 (To the Home-Buying Veteran) provide a good outline of the program. The nearest VA regional office may be reached by dialing 1-800-827-1000. The department can be reached on the Internet at http://www.va.gov.
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