Purpose Of VA Loans Is To Promote Home Ownership To Veterans

The purpose of VA Loans is to promote homeownership to members of the U.S. Military who served in the U.S. Armed Services. The VA home loan program is among the most powerful benefits available to American military veterans, active-duty service members, and some surviving spouses. Established in 1944 through the Servicemen’s Readjustment Act, commonly known as the GI Bill, the clear purpose of VA loans is to help those who served our country achieve the American dream of homeownership.

What Are VA Loans?

VA loans are mortgage options endorsed by the U.S. Department of Veterans Affairs (VA). The purpose of VA loans is to allow eligible veterans and service members to build, buy, or refinance a home with favorable terms. The loan is issued by private lenders, such as banks and mortgage companies but, guaranteed by the federal government, reducing the lender’s risk and offering more flexibility to borrowers.

The Core Purpose of VA Loans

The federal government purpose of VA Loans and its creation was to reward our men and women in uniform who served both in wartime and peacetime.  In order to qualify for VA Loans, the veteran needs a valid Certificate of Eligibility from the U.S. Department of Veteran Affairs. Remember, not all members who served in the United States Military qualify for VA Loans. They need to get awarded with a COE (Certificate of Eligibility).

Benefits of VA Loan Program

There are so many benefits of VA Loans. The VA loan program strengthens communities through homeownership by supporting veterans in buying homes. It encourages financial responsibility and equity growth. It provides generational wealth opportunities for military families. Lastly, it promotes stability for those transitioning from military to civilian life.

Other Benefits of VA Loan Program

Here are other benefits of VA loan program. It is 100% financing, means it require zero down payment. No annual mortgage insurance premium like FHA loans. There is a VA Funding Fee that is rolled into the VA loan balance so that it does not have to come out of the veteran’s packet. You’ll have a 2.125% VA upfront funding fee but do not have any monthly mortgage insurance premium. The upfront funding fees are waived for disabled veterans.

VA Eligibility Requirements

Here are the VA Loan Program requirements:

• 100% Financing
• Department of Veteran Affairs allows home sellers to offer up to 4% in sellers concessions to the veteran home buyer to use it for closing costs
• A veteran home buyer does not need any money to purchase a home
• No down payment requirement
• Closing costs can be covered with either a sellers concession or lender credit by the mortgage company
• VA does not have any credit score requirements
• Gustan Cho Associates can originate and fund VA Loans down to a 500 credit score
• VA does not have debt to income ratio requirements.
• Borrowers can get an approve/eligible per AUS Findings with a 60% debt to income ratio. This holds true as long as they have strong Residual Income
• VA Loans are for owner-occupied homes only:
• Veterans can purchase a one to four-unit owner occupant home with a VA Loan
• Collections and charge off accounts do not have to be paid off to qualify for VA Loans
• They need to have served a certain amount of time to get awarded with a Certificate of Eligibility which is the main ticket to get a VA home loan.

Qualifying For VA Loans With Bad Credit And High DTI

The purpose of VA Loans is to reward our veterans who served in the U.S. Military with a Certificate of Eligibility for their service. Being eligible for a VA Loan is one of the greatest benefits a veteran can ever get for their duty in serving in our military. Since the purpose of VA Loans is to promote homeownership for veterans, the VA Guidelines are very generous with regards to credit and debt to income ratios.

VA Loans is one of the easiest home loan programs in the country. The U.S. government realizes that many veterans have bad credit due to not being able to pay their bills on time due to their deployment.

Many times veterans get transferred from one location to another and may be late on paying their monthly debts timely. VA Loans has much lenient Mortgage Guidelines than FHA Loans. However, most lenders have tougher lending requirements on VA Loans due to lender overlays.

VA Guidelines On Bankruptcy And Foreclosure Versus FHA Loans

Here are the comparison on VA Loans Versus FHA Loans in qualifying for a mortgage after bankruptcy and foreclosure:

• VA and FHA both require 2 year waiting period after Chapter 7 Bankruptcy to qualify for a mortgage
• Borrowers can qualify for VA and FHA Loans one year into their Chapter 7 Bankruptcy repayment period
• This holds true as long as they can get approval from Chapter 13 Trustee
  • Provide 12 months of timely payments
  • There is no waiting period to qualify for both VA and FHA Loans after Chapter 13 Bankruptcy discharged date
• Waiting period is 2 years after the recorded date of foreclosure and deed in lieu of foreclosure to qualify for VA Loans versus FHA where HUD requires 3 year waiting period
• Waiting period is 2 years after the short sale date of a prior short sale to qualify for VA Loans versus FHA where HUD requires a 3-year waiting period to qualify for FHA Loans

Deferred Student Loans

VA will waive deferred student loan payments if the student loans have been deferred for 12 or more months. Non-deferred student loans, here is how VA Guidelines works:

• Take 5% of the outstanding student loan balance
• Divide that figure by 12  months
• The resulting figure is the hypothetical student loan payments used on VA Loans
• FHA used to waive this but no more.

With FHA, all deferred student loans need to be calculated either by taking 1.0% of the deferred student loan balance and using that as a monthly payment or getting a statement from the student loan provider on a proposed amortized monthly student loan payment on an extended payment plan. Conventional Loans allow Income-Based Repayment as long as the IBR Payment reports on all three credit bureaus. Student loans are one of the biggest obstacles due to the large monthly payment amount when it comes to qualifying for a mortgage.

Co-Borrowers And Non-Occupant Co-Borrowers

One of the disadvantages with VA Loans is that the Department of Veteran Affairs will only allow veteran home buyers to have their spouse as co-borrowers. Non-occupant co-borrowers are not allowed with VA Loans like it is with FHA Loans.

Frequently Asked Question (FAQs): Purpose of VA Loans

1. What is the primary purpose of VA loans?

The primary purpose of VA loans is to help veterans, active-duty service members, and some surviving spouses become homeowners by offering affordable mortgage options.

2. How does a VA loan make homeownership easier for veterans?

VA loan make homeownership easier for veterans by requiring no down payment, no private mortgage insurance, and offer competitive interest rates.

3. Who are eligible for VA loans?

Eligible borrowers include veterans, active-duty service members, specific National Guard and Reserve members, and qualified surviving spouses.

4. Does the VA actually lend money?

No. VA loans are issued by private lenders but backed by the U.S. Department of Veterans Affairs.

5. Why don’t VA loans require a down payment?

portion of the loan is guaranteed by the VA, giving lenders confidence to offer 100% financing to eligible veterans.

6. Can a veteran with low credit still get a VA loan?

Yes. VA loans have more flexible credit guidelines than most conventional loans.

7. Is the VA loan benefit a one-time offer?

No. Veterans can use their VA loan benefit multiple times if entitlement is available or restored.

8. What types of homes can be purchased with a VA loan?

You can use VA loan to purchase condos, single-family homes, townhomes, and some manufactured homes, as long as they’re primary residences.

9. Are VA loans only for first-time homebuyers?

No. VA loans are available to first-time and repeat homebuyers who meet eligibility requirements.

10. Why is promoting homeownership important for veterans?

Homeownership helps veterans build financial stability, community roots, and long-term wealth.

Again, the purpose of VA Loans was for our government to reward our veterans who put in the required service in the U.S. Military become homeowners with no money out of pocket and less than perfect credit. Gustan Cho Associates specializes in originating and funding VA Loans with no lender overlays. Veterans who need to qualify for VA Loans, contact us 800-900-8569 or text us for faster response. Veterans can also email inquiries to gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.