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Veterans Administration Mortgage
Department of Veterans Affairs (VA) mortgage.
Department of Veterans Affairs (VA) mortgages enable qualifying veterans or their surviving spouses to borrow up to the annual federal limit in order to buy conventional homes, mobile homes, and condominiums with little or no down payment.
The VA guarantees repayment of the loans. This federal guarantee means that banks and thrift institutions can afford to provide 30-year VA mortgages on favorable terms even during periods when borrowing in general is expensive.
Interest rates on these mortgages, formerly fixed by the Department of Housing and Urban Development (HUD), are now set by the VA itself. For more information, call the VA's local toll-free number listed in your phone book.
VA loan or mortgage
A home loan guaranteed by the Department of Veterans Affairs (www.homeloans.va.gov/elig2.htm) (known as the Veterans Administration before 1989), which will pay the lender up to certain limits if the borrower defaults.In some instances, the VA will decide to purchase the home from the lender after default and attempt resale,calculating that the profits from a resale will make the transaction cheaper than paying off the loan. By law, it is required to do this analysis on all defaulted loans.Eligibility for a VA guarantee is complicated and depends on the borrower's dates, length, and type of service; whether the borrower is currently active in the military; whether the borrower is in the National Guard or the Reserves; and the number of months the borrower was in peacetime or combat service.
A mortgage with no down payment requirement, available only to ex-servicemen and women, on which the lender is insured against loss by the Veterans Administration.
Subject to a proviso, VA loans are advantageous for veterans who need a no-down-payment loan. In most areas, VA loans can be larger than FHA loans. FHA also requires at least 1% down and the insurance premium is higher than on VAs. Conventional loans with no down payment carry interest rates .75% higher and up, depending on the borrower's credit score.
The proviso is that VA borrowers may pay a higher price (rate or points) than is available on either FHAs or conventionals. They shouldn't—in the competitive wholesale market where lenders quote prices to mortgage brokers, the prices are much the same. But the retail market is something else. Some loan providers view veterans who need no-down-payment loans, and who trust the loan provider to give them the market rate, as sheep to be fleeced.
To protect themselves, veterans should consult a Web site that prices all three types of loans. There aren't many sites that price VAs, but one that does it well is www.Countrywide.com. It shows about the same rate and points for VA, FHA, and conventional loans. Use it to shop.
The VA Web site, www.homeloans.va.gov, will tell you who is eligible, how you go about obtaining a Certificate of Eligibility, whether eligibility can be used more than once, the types of properties that can be purchased with a VA loan, the range of insurance premiums for different categories of veterans and different loan purposes, the conditions under which VA loans can be assumed by a buyer, the types of VA home loans, and more.