I thought it fitting that on Veteran’s Day I post something relevant.  Being a veteran of the Vietnam Era, I have had some experiences with the inner working of the government.  Now, it seems, the VA mortgage has taken on new meaning, especially with the current market situation.

Buyers Market, Sellers Market

In times of a seller’s market, the VA loan is given the back seat.  Veterans are prohibited from paying some closing costs, and when the market is booming, people don’t want to go through the hassle of dealing with a mortgage that requires them to put up part of the closing costs, and having to wait sometimes long periods for the creaky government wheels to turn.  Now it is a different story, because the VA mortgage is still alive and well, and with many vets returning from Iraq, they ill be looking for suitable housing.

How The VA Loan Works

The government does not actually lend money, but guarantees the loan in lieu of the veteran’s cash down payment.  If the veteran defaults, the lender is covered by the guarantee.  Lenders can therefore give a loan to a vet covering the entire cost.  No PMI insurance is needed, because the government guarantees the loan.  Loans can be made up to $417,000 to veterans who qualify.  Veterans can usually put down cash to cover anything over this ceiling.  The Government National Mortgage Association, known as Ginnie Mae, packages these loans for the secondary market.  They have now changed their rules to allow loans over the $417K if veterans put down money on the loan.  This opens up a whole new market.

Reason To Make VA Loans

The government has customized the process so that the hassle of getting the loan closed is no longer such a big deal.  Lenders can even order appraisals by computer and get a quick turnaround. Judy Caden, director the Department of Veterans Affairs Loan Guaranty Service, says that her department has been streamlining and automating its procedures since the mid-’90s.  This is surely good news for lenders.

In Conclusion

It is good to see the government taking an active interest in the affairs of the veteran.  It is also good news to lenders who are very wary of the current market and people’s credit stance.  According to the Census Bureau, there are 29.4 million veterans in the US today.  It is of a certainty that many will be looking for housing, both older vets needing to downsize, and young vets who are returning and want to begin their life again.  It is good to see some sunshine in the mortgage market.