VA Loans

What is a VA Loan?

In 1944, the VA Loan was established through the original Servicemen’s Readjustment Act. This Act is also called as the GI Bill of Rights. Then President Franklin D. Roosevelt signed the GI Bill into law. This provided veterans with a federally guaranteed house with no need of down payment. The no down payment feature of the GI Bill was enacted to provide housing and assistance for veterans and their families to own their dream houses. The dream of homeownership really became a reality for veterans. Private lenders make the VA guaranteed loans available to eligible veterans for the acquisition of a home, which is required to be the veteran’s own personal occupancy. Having a guarantor means that the lender is protected against any losses if the borrower fails to payback the loan. The guaranty is the one that replaced the down payment, which is traditionally done to protect the lender. With the guaranty in placed, you are now able to obtain more favorable financing terms.

Who is eligible for a VA Loan?

Those who are eligible are the wartime/conflict veterans, reserves and National Guard, peacetime service, and other types of service. Below is the list of the requirements.

Wartime / Conflict Veterans

If you are a wartime/conflict veteran, who was not dishonorably discharged and has served at least 90 days, you are eligible for a VA Loan. The following are the list of what’s considered as ‘wartime/conflict’.

–       World War II – September 16, 1940 to July 25, 1947

–       Korean Conflict – June 27, 1950 to January 31, 1955

–       Vietnam Era – August 5, 1964 to May 7, 1975

–       Persian Gulf War – Check with VA regional office for eligibility

–       Afghanistan and Iraq – check the VA’s website for eligibility guidelines for the current service in Afghanistan and Iraq.

Reserves and National Guard

If you have already completed at least six years of service, and have been honorably discharged or still serving, then you may be entitled for a VA loan. For more information, contact your regional VA office.

Peacetime Service

If you have completed your Peacetime services for at least 181 days of continuous active duty and have not been dishonorably discharged, then you are also eligible for a VA loan. Should you have been discharged due to a service-connected disability, you must contact your regional VA office to verify.

–       July 26, 1947 to June 26, 1950

–       February 1, 1955 to August 4, 1964 or

–       May 8, 1975 to September 7, 1980 (enlisted) or to October 16, 1981 (officer)

–       Enlisted veterans, whose service started after September 7, 1980 and / or officers, whose service started after October 16, 1981, must have been with the service for at least two years.

Other types of services that are eligible for a VA loan:

–       US citizens serving the armed forces of a government allied with the United States throughout the World War II.

–       Surviving spouses of eligible individuals, who passed away while on duty or due to service-related injuries. However, the surviving spouse must not have remarried.

–       The spouse of any active Armed Forces member, who have been listed as a prisoner of war or missing in action for more than 90 days.

What type of home can I buy with a VA Loan?

When you apply for a VA Loan, you have to ensure that the loan will be used to finance your own residence that is within the territories of United States. As for the type of home you’ll purchase, you can pick among the following options below:

–       A single-family type home

–       A townhouse or condominium that is under a VA-approved project

–       A newly constructed house

–       Refinances of home: this only include certain kinds of home improvements.

How do I apply for a VA guaranteed loan?

To apply for a VA loan, you may contact any mortgage lender that is part of the VA home loan program. You will need to get a Certificate of Eligibility from VA to show as proof of eligibility for the VA loan.

For the application of the Certificate of Eligibility, you need to submit a completed VA 26-1880 Request for A Certificate of Eligibility For Home Loan Benefits form at one of the VA Eligibility Centers near you. Include in your application a proof of military service. Though there are some cases that is possible for VA to determine eligibility without proof of service, it is still best to have all your documents prepared.

I already have an approved VA Loan. Is it still possible to get another one?

Yes, depending on the situation, your eligibility for the loan is reusable. Usually, if you have already completed your payments with your prior VA loan, and the property has been disposed, you can have your eligibility restored for additional use. If the property is still yours but you’ve already paid the VA loan in full, your eligibility may also be restored; but this type eligibility restoration is a one time only.

To apply for a restoration of eligibility, you must complete VA 26-1880 form to any of the VA Eligibility Centers near you. Also include in your application the proof that you have already paid your previous VA loan in full and, if applicable, proof that you have the property disposed. The proof can be a document from the former lender that states that you’ve paid in full or a copy of the HUD-1 settlement statement that was completed in connection of a sale of the property or refinance of the prior loan.

What are the negatives of a VA Loan?

–       VA loans made before March 1, 1988 may be assumed without any qualifying of the new buyer. Thus, if the buyer defaults, you may be liable for the payments.

–       There are some sellers who may be hesitant to deal with people, who are availing of a VA Loan. This is because having a VA loan usually means that it takes longer to process than conventional loans. However, things have improved recently. Though, the processing time is still longer compared to a conventional loan, it is not that lengthy anymore.

–       Sometimes, sellers are asked to pay a portion of the closing costs. Because of this, sellers may not be amendable to negotiate the sales price of the houses.

What are the benefits of a VA Loan?

–       You are assured of 100% financing and no down payment loans

–       No Private Mortgage Insurance (PMI)

–       You won’t have to pay penalties if you prepay the loan.

–       Competitive interest rates

–       Qualification for the loan is sometimes easier compared to applying for a conventional loan.

–       All closing costs may be paid by the sellers.

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