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A Quick Guide to VA Loans
BEFORE AND AFTER MOVING DAY
Soon after final settlement you will move into your new home. Before you move in, you should check the house carefully to be sure that it is in good condition, and that the builder or seller has completed everything called for in the contract. For additional information on some of the things you should look for, see part 2.
If you are buying a new house, you may make an agreement with the builder to move in before all outside work is completed. For example, the builder may not be able to complete the driveway or walks because of cold weather. In such cases, however, it is important that you have a clear understandingin writingthat any uncompleted work of this sort will be completed properly by a specified date or within a reasonable time thereafter. It is usually desirable to check with your lender, or with the VA office.
When you first move into a house, you may have to do a certain amount of touching up, some of which may be the result of your moving in. After that, if you have a new house, your maintenance expenses should be very little for the first 2 or 3 years.
You should obtain from your builder or seller copies of the manufacturer's warranties on any mechanical or electrical equipment included in the home (heating plant, water heater, refrigerator, range, washing machine, dishwasher, etc.), together with information as to whom to call in case the equipment needs to be serviced. Read and carry out any instructions that may be supplied to you on how to use and maintain each piece of equipment properly.
In general, once you buy your home you will have to pay for future repairs and upkeep, such as outside and inside painting and decorating, and maintenance of the heating system and other equipment. However, when you buy a new home you will be given a warranty by the builder. In the warranty, the builder certifies that the dwelling is constructed in substantial conformity with the plans and specifications on which VA has based the valuation of your home. It is effective for 1 year after the date you get title to your home or move into it, whichever occurs first. If the completion of any work was delayed by conditions beyond the builder's control; i.e., concrete walks which could not be installed because of freezing temperatures, the lyear warranty on such work extends for 1 year from the date of its completion. The warranty applies only with respect to instances of substantial nonconformity with approved plans and specifications and only if you give the warrantor notice of them in writing before the lapse of the warranty's effective date.
If you buy a new home that is less than 1 year old, has never been occupied before, and was not inspected by either VA or FHA during construction, VA will ordinarily require that the builder provide you with an insured 1-year protection plan on the property. The protection plan must provide for (a) an insurancebacked warranty against defects caused by faulty workmanship and/or defective materials during the first year; (b) an insurancebacked warranty of the wiring, piping and duct work of the electrical, plumbing, heating, and cooling systems during the 2nd year; and (c) direct insurance coverage against structural defects which seriously affect livability from the 3rd through the 10th year.
If at all possible, you should get the builder's agreement in writing as to what the builder is willing to do to correct defects. Many builders of new houses usually assume responsibility during the first month or two after you move in for certain items needing correction in new homes. Some of these items may be: cracks in the masonry work; opening or spreading of woodwork joints; improper operation of doors, cabinets, and windows; water leaks at windows or doors; exterior paint blistering or peeling; settlement of ground around your foundation; tile in your bathroom or kitchen cracking or pulling away from the tub or sink; dampness, as distinguished from actual water, developing in your basement; and excessive floor shrinkage or swelling.
In all cases where you find flaws which need attention, you should notify the builder or manufacturer and allow a reasonable period of time to make any needed corrections. You should expect friendly cooperation from the builder and in turn you should take the same attitude. It may hurt your own interests to ask for any work or repairs to which you clearly are not entitled, as it may affect the builder's readiness to do the things to which you are entitled or which may be of the borderline variety. If you feel that your home has defects which the builder should take care of, and you have not received a response to your requests that they be corrected, you may write in detail about these items to the Loan Guaranty Officer of the local VA regional office. The VA office will review your protests and advise you regarding any assistance they are in a position to give you. Remember, however, that VA is neither authorized nor permitted to guarantee that you will be completely satisfied with your home, or that any specific defect will be corrected.
As an additional safeguard for new construction, VA may pay or otherwise compensate for the correction of structural defects seriously affecting livability which develop within 4 years of the time a home loan is guaranteed or made. The assistance may be requested in the same manner as defects reported when a builder has failed to respond to a request for correction. There is no form to complete and a detailed letter to the Loan Guaranty Officer of the VA regional office or center will he efficient.
A frequent problem encountered by new homeowners is standing water on some part of the lot after a rainfall or watering. This should ordinarily be resolved by finished grading which is intended to provide diversion of water away from the building and from the lot by intercepting the water into lot line swales (low lying land). Frequently the swales not only carry the drainage from your property, but also intercept and carry the drainage from adjacent higher properties. Care must be exercise in making additional improvements on your property so that the grading and drainage pattern is not changed or interrupted by plantings, walls, or other obstructions.
If you buy a house which has been previously occupied, there is usually no action you can take against the seller to have defects corrected unless there has been misrepresentation by the seller. That makes it even more important to be sure that the house is in proper condition before you buy.
Remember, you are obtaining a loan from a private lender which must be repaid just as you must repay any money you borrow. The VA guaranty, which protects the lender against loss, encourages the lender to make a loan with terms favorable to the veteran. But if you fail to make the payments, you may lose your home through foreclosure, and you and your family would probably lose all the time and money you had invested in it
Furthermore, if the lender takes a loss, VA must pay the guaranty to the lender, and the amount paid by VA must be repaid by you.
It is most important to you that you make each mortgage payment on the date it is due. If at any time you are unable to make a payment on schedule, get in touch with your lender immediately. The lender may be able to help you avoid getting into Serious difficulties.
If you should decide to sell your home and the VA loan was made on or after March 1, 1988, you may not allow someone else to assume that loan or "take over the payments" without the prior approval of VA or your lender. Should you fail to obtain this approval, your lender has the right to declare your entire loan balance due and payable at once and may foreclose the mortgage and file a claim with VA. You would be liable to VA for the amount of any claim paid in such a situation. If you have an older VA loan and do not have to obtain prior approval for someone t~ assume that loan, you will remain personally liable for any claim paid in the event of loan default, unless you obtain a release of liability from VA.
You can sell your property and avoid future liability: (1) by seeing that your VA loan is paid in full (either by the Purchaser paying all cash or obtaining his or her own loan); or (2) by obtaining prior approval from your lender for the purchaser to assume your VA loan with your release from liability; or (3) by obtaining a release of liability directly from VA if you do not have to obtain the prior approval from your lender for an assumption.
To apply for approval of the assumption of your VA loan, contact the lender to whom you send your monthly payments. You will receive the necessary instructions and forms for you and the purchaser to complete and return to the lender. If the VA loan is current and the purchaser appears to be a satisfactory credit risk and agrees to assume your liability to VA and the lender, then the assumption may be approved.
If the lender believes a prospective purchaser will not be able to repay your VA loan, you may
appeal this determination to the VA regional office that processed your VA loan. That office may
be able to approve the assumption. If VA does not approve the assumption, and if you have been
unable to find another purchaser and cannot afford to continue the payments on the VA loan,
then you may apply to VA for special approval of the assumption. If special approval is
granted, you will remain secondarily liable to VA if a claim is later paid on your loan.
If your loan was made prior to March 1, 1988, then you must apply directly to VA for a release of
liability. The process followed by VA will be similar to that followed by a lender making a decision
about the prior approval of an assumption of a newer loan.
Selling your home and allowing someone else to assume the VA loan will not permit you to reuse your
benefit. In order to qualify for restoration of your entitlement so that you may use it to obtain
another VA loan, you must (1) sell your home and have your VA loan paid in full, or (2) sell your
home to an eligible veteran who will assume your VA loan and substitute his or her own entitlement.
Approval of the assumption of a loan made on or after March 1, 1988, must first be obtained from the
lender, and then VA will process the substitution of entitlement. VA can process a request for release
of liability and substitution of entitlement on an older loan at the same time.
FREQUENTLY ASKED QUESTION # 8 [ -more VA Loan questions- ]
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Q: VA Home Loan Entitlement
A: Some first-time homebuyers are misinformed as to the workings of a VA Loan. The Veterans Administration does not normally act as a lending agent. Instead, the VA is in the business of guaranteeing the loans of veteran. In most cases, the VA offers a guaranty to those who meet the requirements, the first of which include a good credit rating. If you are considering any kind of home loan, it's best to consult a credit counselor and a financial planner to find out what credit rating you already have and what you can do to improve your credit rating before applying for the guaranty. It's important to know that a VA home loan guaranty is available only if the veteran has the income to handle house payments. A VA loan guaranty is not an automatic benefit. Your financial planner or credit counselor can go a long way towards helping you prepare your personal finances before filling out that home buyer's paperwork.
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