- The Department of Veterans Affairs offers veterans and active military high loan-to-value (LTV) financing with no mortgage insurance premium. Generally, VA loans don't require a down payment, whereas conventional loans typically require at least 20 percent of the sales price. The VA guarantees the loan, protecting the lender against loss, says the department. The VA also assists borrowers in default due to temporary financial difficulty.
- Not all military are entitled to a VA loan, and the VA limits the amount that can be borrowed without a down payment. VA loan limits vary by county. Veterans who already have a VA loan on another property may not obtain another one until they pay off the existing VA loan. Also, dishonorably discharged military are not eligible. Conventional loans are available to otherwise credit-worthy borrowers ineligible for VA loans.
- Unlike conventional lenders, which require monthly mortgage insurance payments on loans with higher than 80 percent LTV, the VA allows borrowers to acquire a home for little or no down payment and no mortgage insurance premium. The VA is also more flexible than conventional lenders when it comes to borrowers in financial distress. Mortgage servicers must first offer them repayment plans, special forbearance and traditional loan modification programs before foreclosing.
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