The Facts You Need To Know About AB Guaranteed Loans

THE AB GUARANTEED LOAN

An AB Guaranteed Loan may be obtained from many private lending institutions such as banks, savings, loans and mortgage companies by Veterans who are eligible subject to the strict requirement that the home must be for the veteran’s own personal occupation.

When an application is made by a veteran to any of the institutions stated above for a loan and if the loan is approved, AB guarantees a part of that loan so as to indemnify the lender against any losses to the extent of the AB guarantee so that the lender in turn could offer more favorable financial terms to the veteran.

There is no stipulated maximum limit for an AB Loan although it has now become tradition for lenders to place an upper limit of $240,000 on an AB Loan.

This situation has arisen as a direct consequence of the secondary market currently placing an upper limit of $240,000 on AB Loans that are sold to them by the lenders. Eligible veterans should be generally able to obtain a down payment free loan all the way up to $240,000.

Although a veteran’s basic entitlement remains at $36,000 (or to a maximum of $60,000 in respect of certain loans exceeding $144,000), lenders are known to generally extend credit without recourse to a down payment and up to four times the available entitlement of the veterans who are credit and income qualified with the property appraisal too compatible with the asking price.   

FEATURES OF AB LOANS

• All qualified veterans have equal opportunities of obtaining an AB Loan
• No down payment is required (except in specific cases where the lender may insist due to some reasons of his own or if the purchase price is far in excess of the reasonable market value of the property)
• The buyer is informed of the reasonable value
• Interest rate is negotiable
• The ability to finance the AB funding fee (in addition to the reduced funding fee with a down payment of a minimum 5%; with veterans in receipt of AB compensation being exempted)
• The closing costs compare favorably with those of other financing types; or maybe even lower
• Mortgage insurance premiums are not required
• The mortgage is assumable
• No penalties payable on prepayments
• AB will assist to obtain the cooperation of the Builder to get a warranty on the construction in respect of homes inspected by the AB while being constructed
• AB assistance is given to veterans who are in default of monthly payments due to any temporary financial problems

THINGS THAT AB WILL NOT HANDLE

• AB only guarantees the loan and does not guarantee the house with regard to thy absence of any defects. It is the veteran’s sole responsibility to take care of those aspects and to satisfy himself with the property he intends to purchase. Even the AB appraisal done for the purpose of guaranteeing part of the loan to the lender does not constitute an inspection report for the purposes of any possible defects or shortcomings in the property.
• A veteran purchasing a property is advised to get an expert professional opinion on it from a qualified agency for residential inspections or from a similar service organization PRIOR TO making a legal commitment on a purchase agreement.

• If you are getting a new home built for you, AB cannot interfere to get any construction defects rectified by the builder although holds the authority to suspend the builder from proceeding any further with the construction under the home loan program.

• AB cannot guarantee if the veteran is making a good investment or not

• AB cannot provide legal services to a veteran. 

THE PROCEDURE FOR A VETERAN TO OBTAIN AAB GUARANTEED LOAN

• Purchase Contract: Veteran to select a home and negotiate the purchase with the seller or his agent and sign the contract subject to the approval of a AB guaranteed Loan.

• Loan Application:  The veteran submits a Certificate of Eligibility obtained by him from AB to the lender selected by him; who then processes all the credit information and request from AB for the assigning of an Appraiser for obtaining a reasonable value for the property. Veteran will have to pay the Credit Report and Property appraisal fees unless the Seller undertakes to pay them. Based on the appraisal received, either AB or the lender will fix a value for the property for the purpose of determining the loan amount only.

• Loan Approval: If the value of the property as fixed above is accepted by all parties concerned, the lender will go ahead with the credit and income verification of the veteran. If the veteran qualifies, the loan may be approved by the lender himself, who is authorized to do so in most cases.

• Closing the Loan: The veteran and his spouse are required to attend the loan closing and sign the necessary papers relating to the mortgage etc. Generally the lender or the closing attorney explains to the veteran all the terms of the loan and when and where the monthly installments are to be paid. When the finalization of the loan is informed to AB, a suitable endorsement may be made by AB on the face of the Certificate of Eligibility to record that it had been already used to grant a loan and return it to the Veteran for his retention. The loan closing procedure may change from state to state.