What Is a VA Riders Home Loan?

A VA Riders Home Loan is simply a VA Home Loan and a mortgage rider combined. These two items may exist together or separately, but have little to do with each other.

The VA home loan is a mortgage loan that is guaranteed by the U.S. Department of Veterans Affairs, while a mortgage rider is a clause in a sales contract that specifies something the buyer must do. For example, the rider may state that the sale of the property is contingent upon the buyer obtaining approval for a loan within 30 to 60 days. This type of clause is typically added to all agreements of sale and it protects the seller if the buyer's financing falls through.

VA loans were designed to make it easier for the returning serviceman or women to buy a home. The program makes it more affordable for the veteran because it allows them to buy with no money down, and without the requirement for private mortgage insurance. Zero-down loans are virtually impossible to find outside of the VA Home Loan Program. Additionally, the VA Home Loan often offers lower interest rates than other types of mortgage financing.

The 1944 GI Bill provided various benefits for veterans, one of which was the VA Loan Guaranty Program. The bill was an attempt to stabilize the economy as we moved from wartime to a peacetime environment. Before the bill, veterans were offered a cash bonus after wartime. In lieu of the bonus, the government chose to offer a guaranty for part of the loan amount.

The U.S. Government assumes responsibility (guaranty) for a percentage of a loan should the veteran default. The guaranty is similar to mortgage insurance on a conventional loan and the mortgage insurance premium on FHA loans, but unlike those types of mortgage insurance premiums, it does not place an additional amount into the mortgage payment each month.

Veterans of the Army, Navy, Air Force, Marine Corps, Coast Guard, National Reserve and their spouses are entitled to leverage the VA Home Loan Program as long as minimum credit, income and length of service requirements are met. To apply for a Certificate of Eligibility, the veteran must complete VA Form 26-1880 and submit it with his most recent discharge or separation papers to one of the VA Eligibility Centers. Find the form and the nearest center by visiting Homeloans.va.gov.

While the Department of Veterans Affairs guarantees the loan, it does not provide the financing. Veterans must apply with a bank or mortgage lender who originates VA Home Loans.