VA-Guaranteed Loans Chapter 12

A type of loan specifically designed for active military service members, veterans, and surviving spouses, where the Department of Veterans Affairs (VA) guarantees a portion of the loan, minimizing the lender's risk.

The amount of money the VA guarantees to cover potential losses for the lender in case of a default by the borrower.

A requirement that the veteran or eligible spouse must reside in the purchased property as their primary residence.

A process that allows a veteran to reuse their VA loan entitlement for a new property after paying off their previous VA loan.

A VA loan feature that allows a veteran to combine their VA loan with a conventional loan to finance a larger purchase.

A loan with no maximum loan amount or income requirements, less stringent qualifying criteria, and no mortgage insurance required. It also allows for no prepayment penalties and may be assumed by a veteran or non-veteran.

A fee paid by VA borrowers that varies from 1.25% to 2.15% of the loan amount, depending on the down payment.

The amount of VA guaranty available to a particular veteran based on their service and previous VA loan usage.

The process of returning a veteran's entitlement to its full amount after they pay off a VA loan in full.

A borrower with temporary financial difficulties can be given a period to catch up on their mortgage payments without penalty.

The maximum debt-to-income ratio allowed for a VA borrower, calculated by dividing total monthly debt payments by gross monthly income.

Total monthly debt payments, including mortgage, car loans, credit cards, and other recurring expenses.

The difference between a borrower's gross monthly income and their total monthly obligations.

The VA's standard maximum debt-to-income ratio for a borrower, used to determine affordability.

A test conducted by the VA to assess a borrower's income and ability to manage monthly debt payments.

A loan made by a lender, but with a portion of the loan guaranteed by the Department of Veterans Affairs (VA). This protects the lender in case the borrower defaults.

VA loans are generally used for the purchase or construction of a 1-4 unit residential property. It's meant for a veteran's primary residence, not an investment property.

A key benefit of VA loans is that they allow for 100% financing, meaning no down payment is required. This can be very advantageous for veterans trying to buy their first home.

VA loans generally have more lenient qualifying standards. This makes it easier for veterans to qualify for a loan, even with less than perfect credit.

One of the key advantages of VA loans is that they do not require mortgage insurance. This saves borrowers a significant amount of money over the life of the loan.

Veterans who were discharged due to a service-connected disability are eligible for a VA loan regardless of their minimum service period.

A dishonorable discharge prevents a veteran from being eligible for a VA loan.

Seller concessions are payments made by the seller to the buyer to help with closing costs. These payments can include things like paying the buyer's funding fee, prepaying property taxes and insurance, or offering a buydown. However, they can't exceed 4% of the property's appraised value.

An eligible veteran is issued a Certificate of Eligibility by the VA. This document proves they meet the necessary service requirements and is used when applying for a VA loan.

A veteran's VA loan entitlement is restored after they pay off their previous VA loan in full. This allows them to potentially reuse their VA loan benefits for another property.

The spouse of a fallen veteran may be eligible for a VA loan if their spouse was killed in action, died from service-related injuries, or is considered missing in action or a prisoner of war.

Individuals may be eligible for a VA loan even with a shorter service period if they were discharged early due to government, hardship, or medical reasons.

VA loans are secured by institutional lenders, but a portion is guaranteed by the Department of Veterans Affairs, protecting the lender against borrower default.

A VA loan can be assumed by a veteran or non-veteran, meaning the new borrower can take over the existing loan.

VA loans do not require mortgage insurance, saving borrowers money.

The VA’s method to assess your ability to repay a loan by comparing your monthly income to your monthly debt payments.

This method calculates your monthly income remaining after deducting essential expenses like housing, recurring obligations, and certain taxes.

The minimum amount of residual income required by the VA, which varies based on location, family size, and loan size.

Factors that can compensate for a borrower's debt-to-income ratio, like good credit, low debt, stable employment, significant assets, and a substantial down payment.

Lenders can consider an exception to the standard debt-to-income ratio if the residual income exceeds the minimum requirement by at least 20%.

VA will issue a release of a veteran's entitlement as long as the loan is current, and the buyer's credit is acceptable.

Even if both spouses are veterans, their entitlements cannot be combined to create a larger VA loan amount.

When a veteran and non-veteran purchase a property together, the VA guaranty only applies to the veteran's portion of the loan.

There's generally no maximum VA loan amount, but it usually cannot exceed the property's appraised value.