109. Which of the following is true of a VA loan?
Answer: D
The Department of Veterans Affairs guarantees to lenders that they will not suffer a loss if the veteran defaults on the loan.
The VA loan program is designed to support veterans by providing a guarantee to lenders, which assures them that they will not incur losses if the borrower defaults. This guarantee is a crucial feature that encourages lenders to offer favorable terms to veterans.
A) Unlike FHA insured loans, there is no mortgage insurance premium or funding fee for a VA loan.
This statement is incorrect because while VA loans do not require mortgage insurance premiums like FHA loans, they do typically involve a funding fee, which is a one-time charge to help cover the cost of the program. Therefore, this option misrepresents the nature of VA loan costs.
B) A qualified veteran may get a new VA loan to purchase a single family rental investment property.
This option is inaccurate as VA loans are primarily intended for primary residences, not for investment properties. Veterans can only use VA loans to purchase homes they will occupy, thus making this choice incorrect.
C) The Department of Veterans Affairs provides loans to eligible veterans at below-market interest rates.
This statement is misleading because the VA does not directly provide loans; instead, it guarantees loans made by private lenders. While this guarantee may facilitate competitive interest rates, the rates are not necessarily below-market, making this option incorrect.
D) The Department of Veterans Affairs guarantees to lenders that they will not suffer a loss if the veteran defaults on the loan.
This statement is accurate as it reflects the core function of the VA loan program. The guarantee offered by the Department of Veterans Affairs indeed protects lenders from losses, which is a key benefit of VA loans.
Conclusion
The correct answer is D, as it highlights the essential role of the Department of Veterans Affairs in providing a guarantee that protects lenders when a veteran defaults on a loan. Options A, B, and C each contain inaccuracies regarding VA loans, thereby reinforcing that D is the only statement that correctly captures the essence of the VA loan program's benefits.