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Using VA House Loans to Purchase Foreclosures





VA house loans are not made by the Department of Veterans Affairs; they are made by approved VA loan lenders such as banks and mortgage companies.


VA house loans are loans that are guaranteed by VA and made to eligible veterans for the purchase of a home. The veteran must occupy the property, it can’t be an investment property.

The VA guaranty of the loan helps the veteran to obtain a loan with no money down at favorable VA loan interest rate.

The veteran has to be VA loan eligibility for the loan. The veteran has to get a Certificate of Eligibility. It may be possible to get a Certificate of Eligibility from their approved VA loan lender.

Most lenders have access to ACE (Automated Certificate of Eligibility) System. ACE is an Internet based system that can establish eligibility and issue a Certificate of Eligibility in seconds.

You can also apply for a Certificate of Eligibility by submitting VA Form 26-1880. If you are planning on using VA house loan you should get your Certificate of Eligibility before you start looking for a house.

Obtaining a VA House Loan is fairly easy and similar to obtaining a FHA loan. Your entitlement or eligibility does not guarantee that you will get the loan.

Lenders must comply with VA income and credit standards and the veteran must be a satisfactory credit risk. The income of the veteran and spouse must be shown to be stable and sufficient to meet the mortgage payment plus the costs of owning a home.

How much is your entitlement or how much is your VA loan limit?

The basic entitlement is $36,000. You may think you can’t get much of a house for $36,000! Well, what VA loan lenders will do is lend up to 4 times the amount of a veterans entitlement without requiring a down payment. That means the lender will lend up to $144,000 without a down payment.

OK, we still are not done yet. For VA house loans in excess of $144,000 to purchase a home, additional entitlement up to an amount equal to 25% of the Freddie Mac conforming loan limit for a single family home may be available. This loan amount is a moving target and it changes yearly. From January 1, 2006 through December 31, 2006, qualified veterans can get a no down payment home loan of up to $417,000.

There are many benefits to VA Housing Loans:

1. Equal opportunity for all qualified veterans to obtain a VA house loan.

2. No down payment. As long as the house appraises for the purchase price the veteran doesn’t need a down payment.

3. An VA appraisal is required just informing the veteran of reasonable value.

4. Because VA will guarantee the loan the VA loan interest rate is negotiable.

5. Closing costs are comparable or lower than other ways of financing.

6. The VA Guaranteed Loan is assumable, subject to VA approval of the assumer’s credit. This feature would be great advantage if interest rates increased. Back in the late seventies and early eighties VA assumable loans were in demand.

7. No mortgage insurance premiums.

8. Right to prepay without penalty.

One big disadvantage is the VA funding fee. It can be financed into the home loan.

You can also use VA home loans to construct a new home.

VA house loans can be a great source of financing if you are a veteran either to purchase a HUD or VA foreclosure home.