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Jon, Home Buyer in Milwaukie, OR

How does the VA loan work?

Asked by Jon, Milwaukie, OR Wed Jun 16, 2010

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A lot of people already gave a lot of good information, so I'll just add one thing. Be careful picking the VA home you are interested in, because VA standards are much higher than most other loans. The home you want might not fund because the VA will refuse to lend on it. Make sure the home is in good condition, or will be in good condition, before you buy (save you some hassle).
0 votes Thank Flag Link Wed Jun 16, 2010
Anyone looking to do a VA loan, or other type of loan should give Geoff Boyd (see answer below) a call. I've closed a few deals with him over the years. Good guy and good loan officer.
0 votes Thank Flag Link Wed Jun 6, 2012
I would be happy to explain all the ins and outs of doing a VA loan. I have helped literally hundreds of veterans in the Portland Metro Area purchase properties throughout my career. Please take a moment and goggle VA Specialist David Waite and just see what comes up. Not enought room here to explain the program but I can get you a property with $0 down, $0 closing and the only costs to purchase would be your home inspection and appraisal and your EM deposit which will be returned to you once you close on your purchase. Contact me at 503-887-5323 or
David Waite-JLSMC
0 votes Thank Flag Link Wed Jun 30, 2010
Hi Jon if you are a recent veteran you my quailfy for a $8000 tax credit a Va loan has special requirements as mentioned but any loan has risk . you have to do your home work and find out what is best for you . I say Buy a home for the long term and a place to raise a family . theres are a lot of good Value in the market right now and interest rates are only going to go up so take some time to choose a home that works for you down the road for the long term and that will make the risk less . good luck Brad
0 votes Thank Flag Link Thu Jun 17, 2010
Craig makes some very good points. When discussing risk however, please keep in mind that everyone has a different appetite for risk. Some people consider it risky to put less than 20% down on a home. As we all know, many people that put 20% down on the purchase of a home 3 or 4 years ago, don't have that 20% equity in their homes any more. In other words, their 20% went up in smoke, and they don't have their cash in the bank either. In many cases, people who took a 0% down loan, still have their cash in the bank. So, who's in better shape? The person who lost their cash when their equity (through no fault of their own) disappeared? Or is it the person who kept their cash? The VA benefit gaurantees the first 25% of the price of the home. That's why the Vet needs to provide their COE (or Certificate Of Eligibility) to the lender. Theri DD214 is used to verify their service to the country and the COE confirms that their entitelement is still in good standing. Anyway, the government insures these loans not because of the risk, but because of the reason for the provide a benefit to those that sacrifice for our country.
0 votes Thank Flag Link Thu Jun 17, 2010
All of what Mark says is true. But the lower the down payment the greater the risk; and the higher the down payment, the lower the risk. Too many people don't mention the risks of the VA loan, because it doesn't sell houses or close loans. Although VA loans are attractive, they are more risky, for both the lender and the borrower. That's why the government has to insure them.

I don't want to dissuade Jon, or any qualified vet, from buying a home or using a VA loan--provided he or she has carefully considered all the possibilities (including his financial ability, family situation, employment prospects, etc.), put away at least six months of living expenses in a savings account, and made a back-up plan.
Web Reference:
0 votes Thank Flag Link Wed Jun 16, 2010
Even a consumer that does 20% down is potentially at risk if the market goes down significantly. Buying a home is a risk no matter what down payment or loan program is used. An increase in equity is certainly not a guarantee. It took about 10 years for our market to recover after the 1980s and no one can truly know what the current market will do over the next few years.

Each circumstance is different and what may make sense for one consumer may not make sense for another.

As with anything in life, there are risks involved with buying a home. Whether we would like to admit it or not, it is all about timing. My wife and I bought at the top of our purchasing power back in 1995. Looking back today, that was the best thing we have ever done. Unfortunately the same is not true for people that purchased in 2007 or 2008.

In any case, a VA loan is not a bad loan. Like FHA, VA loans are set up to help consumers that are experiencing difficulty with their payments - much more so than a conventional loan.
0 votes Thank Flag Link Wed Jun 16, 2010
Lots of sources will tell you how great the VA loan program is, and others will tell you how to get a VA loan. The web page that Lyndia provided below is the most direct source--and probably the best--because it goes to the US Dept of Veterans Affairs.

What you won't find from many sources, especially on the Internet, is a discussion of the hazards of VA loans. And those hazards do exist. By far the biggest risk is occurring in the housing market we have today. I'll explain.

It's important to think long and hard about what your future holds when buying a home. It's even more important when you're buying a home with a no-money-down VA loan. Even if you don't plan to move for 5 years, things can change. A variety of changes in family circumstances (unexpected loss of a job, loss of a family member, new children, etc., etc.) could leave you unable to make payments and unable to sell your home.

To sell your home, you have to have equity, which provides the money to pay the costs of sale. But if you buy without a down payment, you have no equity in either a down market or a stable market. Even when the market is appreciating, it can take years to build enough equity to pay sale costs. Having insufficient funds to sell can lead to snowballing debt and destruction of your credit history. This usually doesn't happen instantly. It builds over time. By the time you recognize that you're in trouble, it's too late. You lose the home, and you can't buy another. Even finding a good rental is hard because of your bad credit.

When purchasing a home, it's important to analyze your circumstances, and only buy if you have a solid back-up plan for the hard times that will come. (A lot of people are having a tough time now--including a lot of ex-REALTORS--because they never had a back-up plan). You won't hear this from many REALTORS who are still in the business, but it's often better to put off a purchase and save money for a down payment than to buy without a down payment. You'll also hear a lot of REALTORS and loan officers try to push you into "as much house as you can afford."

Don't be tempted. Buy as little house as you can get by with, and put away money for your future. (You can always "buy up" to a bigger house after you have established a more solid financial base.) A house should be looked at as only one part of a diversified portfolio of investments that includes bank savings and a variety of other investment vehicles.

Some REALTORS will tell you pie-in-the-sky stories about old ladies who bought their houses for $27,000 in 1964, and sold in 2005 for $1.2 million. But those REALTORS won't tell you about all the other people who bought in 1974 for $27,000, and lost their job in 1975, then lost their home in 1976 with their credit in a shambles. They won't tell you about the vet who bought for $135,000 with no money down in 1990, but then had to sell 18 months later because of a job transfer, but couldn't sell because the market had fallen. They won't tell you about the mid-level manager who bought for $550,000 in 2007, then lost his job in 2009, and is losing his home in foreclosure today because he can't find a buyer, even just for the $460,000 he owes on the note.

A lot of "professionals" here will talk up the up side of home ownership, but few will mention the down side. For a source with a little more balance of good and bad news, check here:…

Best of luck.
Web Reference:
0 votes Thank Flag Link Wed Jun 16, 2010
VA loans will work great for you as long as you are a veteran of war. You have to have that qualification first, then you can be qualified with a bank to see if you can get the loan. Sometimes they have heavier restrictions on what the house and/or property has to have in order to also qualify for the loan, but as the buyer - it is a very good way to go!
0 votes Thank Flag Link Wed Jun 16, 2010
VA loans are a fantastic way to purchase a property! A VA loan can be up to 100% of the purchase price, and can exceed that percentage to include the VA Funding Fee. If you are a disabled Vet, then this fee is waived. In addition, there is NO PMI on the loan and the seller is allowed to pay up to 4% of the sale price towards your closing costs and prepaids. There are reduced closing costs for the Vet, as some of the standard closing costs are considered "non-allowable" fees by the VA. To apply, any VA Approved lender can process and approve the loan for you as long as you meet the requirements (which are fairly straightforward).
Lastly, the tax credit expired for eveyrone except for Vetes. For eligible Vets, the tax credit is good for an extra year! Having worked with VA loans for over 20 years, I can honestly say that VA loans are a great way to purchase a property.
0 votes Thank Flag Link Wed Jun 16, 2010
One of the best websites for you to view is for answers to most questions about VA loans. This will prepare you for speaking with the lender of your choice,
Web Reference:
0 votes Thank Flag Link Wed Jun 16, 2010
The VA basically guarantees the loan - much like Sallie Mae for a student loan. The loan can be up to 100% of the purchase price. You'll need to supply a dd214 and your lender can then get verification from the VA of your eligibility for the loan. A lender will still need to approve your loan; however, the guarantee from the VA is a huge benefit.
0 votes Thank Flag Link Wed Jun 16, 2010
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