VA – Guaranteed Mortgage

The Veterans Affairs (formerly the Veterans Administration) was created just after World War I1 as part of the Servicemen’s Readjustment Act and was authorized to guarantee a stated percentage of loans made to qualified veterans by qualified lenders. Although the Veterans Affairs does not normally make loans, in areas where here are no lending institutions, the VA will grant loans directly to veterans. Generally, the VA guarantees loans that are made by lending institutions to veterans. When a borrower defaults, the VA will pay up to 50% of the amount of the loan when5 the loan is $45,000 or less.

For larger loans the VA will pay any loss up to a maximum of $22,500 plus 40 cents per additional dollar of the loan over $45,000, to a total loss limit of S36,OOO. Because VA loans are available up to 100% of the selling price, brokers are able to sell homes to veterans who otherwise could not afford to purchase a home. In this case the veteran is entitled to only one VA loan; however, in some cases the loan can be transferred to another eligible veteran, and the original borrower’s right to a loan is restored.