VA does not lend the money for your mortgage….not any of the money.  VA does, however, guarantee the loan in case of default.  The maximum guarantee is 25% – which means a lot to the companies that are lending the money.  But VA does not lend the money.

As far as guidelines, VA has a lender’s handbook that clearly spells out all of the guidelines for a home loan.  In general, most lenders follow VA’s guidelines but, since VA does not lend the money, the lenders’ and underwriters’ decisions will always be the final decision.  For example, VA does not have a guideline for a minimum credit score but lenders do have a minimum credit score for VA borrowers.  Since VA does not lend the money, the ultimate rule on credit scores belongs to the lenders.

VA does not set interest rates or closing costs.  Interest rates are dictated by the market and the people who are lending the money.  Closing costs are charged by the people and companies who are responsible for the closing of the loan. VA does, however, set limits on what can be charged to the borrower and most lenders are familiar with the charges.

So, although VA does guarantee mortgages, VA doesn’t lend the money.  The ultimate decision maker is the banks and lenders who are lending you the money for your VA loan.

By Denise DeCarolis