CH 17-4: VA Loans

A document issued by the Department of Veterans Affairs to establish status and amount of a veteran’s eligibility to qualify for a loan guarantee.

Certificate of Eligibility (COE)

The maximum dollar amount of guaranty that applies to an eligible veteran on a VA-guaranteed loan.

Entitlement

A single payment made by a veteran, service member, or survivor to secure a VA-backed home loan.

Funding Fee

A VA loan program that allows a veteran to refinance their existing VA loan with a lower interest rate and lower monthly payment.

Interest Rate Reduction Refinance Loan (IRRRL) (also called Streamline Loan)

An insurance policy paid for by a borrower using conventional financing that protects a lender if the borrower defaults on their loan obligation; usually required when the loan-to-value ratio is greater than 80%.

Private Mortgage Insurance (PMI)

A federal law created in 1944 to provide educational and housing benefits for veterans of World War II.

Servicemen’s Readjustment Act (also called GI Bill)

A federal agency that provides veterans with a range of benefits, including housing assistance, health care, disability compensation, and education; and guarantees mortgage loans to eligible veterans and their surviving spouses.

U.S. Department of Veterans Affairs (VA)

TRUE or FALSE: The VA loan program enabled millions of Americans to purchase homes with VA financing by offering low-interest, no-money-down home loans.

TRUE: The VA loan program helped millions purchase homes by offering low-interest, no-money-down loans, boosting homeownership and stabilizing the postwar economy.

TRUE or FALSE: The VA interest rate reduction refinance loan (IRRRL), or “streamline loan,” requires an appraisal.

FALSE: The VA IRRRL does not require an appraisal; it allows borrowers to refinance their VA loan easily without additional underwriting or valuation steps.

TRUE or FALSE: The borrower must select a VA-approved lender before they can proceed to the loan application process.

TRUE: The first step of the VA loan process is prequalification, which requires selecting a VA-approved lender to verify income and credit.

How did the VA loan program enable millions of Americans to purchase homes with VA financing?

By offering low-interest, no-money-down home loans

By providing a tax incentive for homeownership

By offering low-interest, no-money-down home loans