What is a Military VA Loan?

A Basic Definition

At the end of World War II, it was decided that better attention had to be paid to the needs of veterans. Over the years the whole issue of what is a military VA loan has evolved and changed. Initially, it was seen as a means for veterans to go back to school or buy a home, or maybe start a business.

Today, VA loans are only available to active duty military personnel and veterans. Different kinds of lenders: mortgage brokers, banks etc. offer the loans so that servicemen and women can buy a home. Now, there is one critical factor though: the home must be for use as your primary residence! Over the years, some people have tried to use them for a second home, but that is illegal.

A key feature of the loan is that the VA gives a guarantee to the lender. They insure a portion of the loan amount, that way the lender does not face the prospect of loosing the entire loan, should the borrower default. As a result, the veteran can often get much better terms than they would from a regular bank.

The Benefits

When asking what is a military VA loan, you should check out the benefits of getting one. First

With a VA loan, it’s required that you be furnished with an appraisal of what the reasonable value of the property is. Next, you can negotiate the interest rate you are going to pay. That can be critical over the life of the loan. A rate lowered by even a tenth of a percent can amount to thousands of dollars. Also, this type of loan has no prepayment penalty, and you have no premiums for mortgage insurance.

Some Limitations

Now, when asking what a military VA loan is, you have to keep in mind that it does not do some things. For one thing, the VA can not guarantee you that you will indeed get a loan. There is no rule that says a lender has to give you a mortgage. While you do get an appraisal of the home, that is not necessarily a full home inspection.

So, the house could have termites, bad pipes, faulty wiring, or a host of other defects. You should definitely consider getting a home inspection before making an offer. Finally, be very careful in choosing your home. Remember the old adage: location, location, location. Before you consider buying a place, look at the neighborhood and the community.

Is it in decline, or on the rise? While you get an appraisal as to the current value of the home, there are no guarantees about the future. The VA is not going to bail you out if you buy a house and its value drops. When you consider the recent subprime debacle, be wary of investing in a home without first checking out its potential for the future.