What is a VA Home Loans?
A VA loan is a mortgage loan that’s issued by private lenders and backed by the U.S. Department of Veterans Affairs. It helps U.S. veterans, active duty service members, and widowed military spouses buy a home. Eligible borrowers may only use VA loans for their primary residence. You can’t finance an investment property or vacation home with a VA loan.
* No Down Payment Required
* No Private MIP
* 0 Score Financing Available
Most members of the regular military, veterans, reservists and National Guard are eligible to apply for a VA loan. Spouses of military members who died while on active duty or as a result of a service-connected disability also can apply. Active-duty military personnel generally qualify after about six months of service. Reservists and members of the National Guard must wait six years to apply, but if they are called to active duty before that, they gain eligibility after 181 days of service.
Simply put, a VA Home loan allows qualified buyers the opportunity to purchase a home with no down payment. Also, there are no monthly mortgage insurance premiums to pay, limitations on buyer’s closing costs, and an appraisal that informs the buyer of the property value. For most loans on new houses, construction is inspected at appropriate stages and a one year warranty is required from the builder. VA also performs personal loan servicing and offers financial counseling to help veterans having temporary financial difficulties.
You can have previously-used entitlement “restored” one time only in order to purchase another home with a VA loan if the borrower has paid off the prior loan but still owns the property, and wants to use his entitlement to purchase a second home. This often occurs with active duty borrowers who PCS to a new station but want to keep their existing home for retirement. However, if the prior loan has been paid off and the property is no longer owned, they can have their entitlement restored as many times as they want. They can re-use their VA eligibility for every home purchase from the first to the last.
Also, veterans who have used a VA loan before may still have remaining entitlement (see chart) to use for another VA loan. A veteran’s maximum entitlement is $89,912, and lenders will generally loan up to four times your available entitlement without a down payment, provided your income and credit qualifications are fine, and the property appraises for the asking price. Lenders may require that a combination of the guaranty entitlement and any cash down payment must equal at least 25 percent of the reasonable value or sales price of the property, whichever is less.
For Alaska, Hawaii, Guam, and U.S. Virgin Islands residents, note that maximum original loan amounts have now been increased 50% higher for first mortgages.
Remaining entitlement and restoration of entitlement is not automatic. It can be requested through the nearest VA office by completing VA Form 26-1880. The entitlement may also be restored one time only if the veteran has repaid the prior VA loan in full but has not disposed of the property purchased with the prior VA loan.
You are not eligible for VA financing solely based upon Active Duty for Training in the Reserves or National Guard.
Note: Guard and Reservists are eligible if they were “activated” under the authority of Title 10 or Title 32 U.S. Code. Those with Title 32 service must have at least 30 days continuous active service.
Not necessarily. Choose a VA-approved lending institution that can handle your home loan. A lender can help you review your credit history and determine how much of a loan you can qualify for. Be aware that different lenders have different closing costs and other fees, so it pays to shop around.
The guarantees thirty-year loans with a choice of repayment plans: Traditional fixed payment (constant principal and interest); Graduated Payment Mortgage, or GPM (low initial payments which gradually rise to a level payment starting in the sixth year); and in some areas, Growing Equity Mortgages, or GEMs (gradually increasing payments with all of the increase applied to principal, resulting in an early payoff of the loan). There is no prepayment penalty.
Although there is no maximum VA loan (limited only by the reasonable value or the purchase price), lenders generally will use an applicant’s credit score and ability to repay the loan as guidelines.
Everyone is required to obtain a Certificate of Eligibility. If you do not have this Certificate, you will need to apply using VA Form 26-1880 and this will require a copy of DD-214 (Certificate of Release or Discharge from Active Duty) showing character of service. Along with the Certificate of Eligibility, loan applicants will need to document their credit, savings and employment information.
No. Home loan entitlement is generally good until used if a person is on active duty. Once discharged or released from active duty before using an entitlement, a new determination of their eligibility must be made based on the length of service and the type of discharge received.
Reservists and National Guard members are eligible if they have at least 90 days active service after Aug. 2, 1990. That service can be under either Title 10 or Title 32, however under Title 32, the Guard member must have at least 30 days consecutive service.
Eligibility extends to members who have completed a total of 6 years in the Selected Reserves or National Guard (member of an active unit, attended required weekend drills and 2-week active duty for training) and received an honorable discharge; continue to serve in the Selected Reserves. Individuals who completed less than 6 years may be eligible if discharged for a service-connected disability.
Yes. But there are several clauses that may make this difficult to accomplish. Many veterans use their VA Home Loan Certificate of Eligibility to negotiate in good faith a private home construction loan and then refinance the completed home using VA Home Loans.
The law requires that you certify that you intend to occupy the property as your home. But it specifically provides that occupancy by the veteran’s spouse satisfies the personal occupancy requirement. However, there are no provisions for other family members. VA Home Loans are available for a variety of purposes including building, altering, or repairing a home; refinancing an existing home loan; buying a manufactured home with or without a lot; buying and improving a manufactured home lot; and installing a solar heating or cooling system or other weatherization improvements. You are also allowed to buy income property consisting of up to four units, provided you occupy one of the units.
No. The property must be located in the United States, its territories, or possessions. The latter consist of Puerto Rico, Guam, Virgin Islands, American Samoa and Northern Mariana Islands.
A private lender makes a VA-guaranteed manufactured home loan. The VA will protect the lender against loss if the veteran or a later owner fails to repay the loan. The amount VA will guarantee is 40% of the loan amount or the veteran’s available entitlement, up to a maximum amount of $20,000. The guaranty amount is not the same as the amount a veteran can borrow.
Veterans who had a VA loan before may still have “remaining entitlement” to use for another VA loan. The current amount of entitlement available to each eligible veteran is $36,000. Veterans can have previously-used entitlement “restored” to purchase another home with a VA loan if: the property purchased with the prior VA loan has been sold and the loan paid in full, or if a qualified veteran buyer agrees to assume the VA loan and substitute his or her entitlement for the same amount of entitlement originally used by the veteran seller. The entitlement may also be restored one time only if the veteran has repaid the prior VA loan in full, but has not disposed of the property purchased with the prior VA loan.
When the property is awarded to the Veteran’s spouse as a result of the divorce, entitlement cannot be restored unless the spouse refinances the property and / or pays off the VA loan in full or the ex-spouse is a veteran who substitutes their entitlement.
The Department of Veterans Affairs (VA) acquires properties as a result of foreclosures on VA guaranteed loans. These acquired properties are marketed through a property management services contract with Ocwen Federal Bank FSB, West Palm Beach, Florida. Local listing agents through local Multi Listing Systems (MLS) list the properties.