The VA home loan program is one of the most valuable benefits available to U.S. military veterans. It offers a number of advantages over traditional mortgages, including no down payment, no private mortgage insurance (PMI), and limited closing costs.

Yet, The VA home loan program is one of the most misunderstood and overlooked veteran’s benefits. According to a 2010 National Survey of Veterans, only 10.5% of the more than 20 million U.S. military veterans who are eligible for the program use it.

When asked why they don’t use it, more than 33% of respondents said they didn’t know about the VA loan guarantee, while another large group claimed that FHA loans are easier to obtain. Notably, the majority of those who were unaware of the program were older veterans and unmarried surviving spouses.

While these statistics aren’t exactly flag-waving worthy, they do highlight an opportunity for improvement. The real estate and mortgage industries should take responsibility for educating veterans and their spouses about the VA home loan program and its benefits.

So, what exactly is the VA home loan program? Simply put, it’s a home loan guaranty offered by the U.S. Department of Veterans Affairs.

The VA guarantees to the veteran’s lender that the veteran will repay the loan. Although the guaranty doesn’t cover the entire loan amount, it does cover from 40 to 50% of it, depending on the size of the loan, should the veteran default.

The VA home loan program can be used to:

  • Buy a single-family home or a condominium unit in a VA-approved project
  • Build a home
  • Simultaneously purchase and improve a home
  • Improve a home’s energy efficiency
  • Buy a manufactured home and/or lot

One of the biggest advantages of the VA home loan program is that it allows veterans to finance a home with no down payment, which is a rarity in today’s mortgage landscape. The only other ways to do this are through the United States Department of Agriculture Rural Development Program or with a conventional loan that requires private mortgage insurance (PMI). PMI can add a substantial amount to a borrower’s monthly mortgage payment, while the VA loan has no monthly mortgage insurance premiums.

If you’re considering a VA-backed loan, you’ll need to meet some eligibility requirements, including having suitable credit, sufficient income to pay your bills and mortgage payment, planning on occupying the home, and having a valid Certificate of Eligibility (COE). Obtaining a COE is typically straightforward and can often be done online through the ACE system.

You’ll apply for the mortgage through a traditional lender, and each lender has its own guidelines that you’ll need to meet. While your credit score and overall financial picture will be examined, the lending process for veterans is typically less stringent than it is for civilians.

Despite the many advantages of the VA home loan program, a small percentage of eligible veterans take advantage of this valuable benefit. To help bridge this gap, the real estate and mortgage industries should take responsibility for educating veterans and their spouses about the program’s benefits.

The VA home loan program offers several benefits, such as no monthly mortgage insurance premiums, limitations on closing costs, and no prepayment penalty. Eligibility requires suitable credit, sufficient income, plans to occupy the home, and a valid Certificate of Eligibility. By finding the right lender and doing a little bit of research, eligible veterans can achieve their dream of homeownership and take advantage of this valuable benefit.

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