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Sunday, March 21, 2010



Banks and other private mortgage companies make a special type of home loan to veterans of the US Armed Services. A portion of each loan is guaranteed by the Veterans Administration (VA), and protects the lender's investment if the borrower defaults.

Who Is Eligible for a VA Loan?
  1. Wartime/Conflict Veterans who were not dishonorably discharged, and served at least 90 days
  2. World War II - September 16, 1940 to July 25, 1947
  3. Korean Conflict - June 27, 1950 to January 31, 1955
  4. Vietnam Era - August 5, 1964 to May 7, 1975
  5. Persian Gulf War - Check with VA regional office for specific eligibility.
  6. Afghanistan and Iraq - Check the VA's Web site for eligibility guidelines for current service in Afghanistan and Iraq.


The key to the success of the program was that no down payment was required. This allowed veterans returning from the war to purchase homes almost immediately, without having to save for a down payment. While some of the specifics of the program have changed over the years, VA loans are still insured by the government against default, and still offer no down payment or private mortgage insurance. Read more on Choosing a Mortgage Loan.

Here are some other benefits of VA loans: No prepayment penalties; Insured against default by the United States government; Lower closing costs. Another benefit of a VA loan is the ability to apply for an interest-rate reduction loan. Offered by the VA as part of the Streamline Refinancing Program, this loan allows veterans to refinance to a lower rate with little or no out-of-pocket expenses. VA loans definitely aren't for everyone. While the maximum guaranteed -- $240,000 -- will buy a lot of house in most parts of the country, potential buyers in high-priced markets such as California or Manhattan may have to go another route for their financing.


While the eligibility certificate indicates how large a loan the government will guarantee, that doesn't mean the vet is automatically entitled to a loan of that amount. Most first-time buyers will be guaranteed up to the VA maximum of $240,000. But the actual mortgage amount will be based on income, assets, debts and credit history -- just like a conventional loan. With permission from the VA, sellers can also allow a buyer to assume their loan, making a resale very attractive. But that also means that the veteran can't use the loan to buy the next home. Until the loan is paid off, a veteran can only borrow the difference between the outstanding loan and the maximum allowed by the certificate of eligibility. If you pay off a VA loan, save the paperwork. That way, if you ever apply for a second VA loan, you can ask for the maximum amount you're allowed. And it's really not any easier to qualify for a VA loan. It's a no-down-payment program, that's a benefit to vets. But that doesn't mean lenders could approve an application with a serious lack of credit or insufficient income.




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Current Mortgage Rates*

Loan Type
National Average
30-yr. fixed5.25%
30-yr. fixed jumbo5.50%
15-yr. fixed4.38%
15-yr. fixed jumbo4.88%
7/1 ARM4.12%
5/1 ARM4.12%
3/1 ARM4.25%
1-yr. ARM2.88%
1-yr. LIBOR ARM4.50%
10/1 ARM4.75%
*Mortgage Rates Updated: 03/19/2010