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The VA Loans Guaranty Program
One of the reasons why it is easy to get VA loans is that the VA serves as your guarantor. The VA gives the lenders the guaranty that in the case that you, as the borrower defaults, the VA will compensate the lender and shoulder a certain part of the loaned amount.
This is what the VA loans Guaranty Program does. According to the program, VA loans will guarantee up to 25% of the amount of the home loan, with a maximum amount limit of $104,250. This means that the maximum amount of a loan that can be guaranteed by the Guaranty Program is $417,000. Thus, the home you are eyeing should be priced within this amount. The funding fees should also preferably be within this amount when added to the home price so you wouldn’t have to spend anything anymore.
Loans that are guaranteed by the VA Guaranty Program can be easily granted by private lenders. However, there is the law of occupany, which means that you can only get a loan for a home you intend to occupy. If the VA guarantees your loan, you don’t have to make a down payment.
So what protection do lenders have against the risk of you defaulting on your loan payments? Well, instead of asking for a down payment, the lenders take the VA for its word to guaranty your loan.