Here's What You Need To Know About VA Home Loans

There are many reasons why a loan guaranteed by the VA might be a good choice for your next home.




Editor’s Note: This article originally appeared on Military.com, the premier source of information for the military and veteran community.

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.




What if I’ve used a VA home loan before?

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 you’re 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% 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.

What service is not eligible for a VA home 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 U.S. Code as was the case for the Iraq/Afghanistan.

Do all local lenders offer VA loans?

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.

What types of repayment options are available?

The guarantees 30-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.

What is the maximum VA loan?

Although there is no maximum VA loan (limited only by the reasonable value or the purchase price), lenders generally limit the maximum VA loan to $417,000.

If I was discharged years ago and want to qualify for a VA loan, what forms or other documents will I need?

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 showing character of service. Along with the certificate of eligibility, loan applicants will need to document their credit, savings and employment information.

Does a veteran’s home loan entitlement expire?

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 are eligible for VA loans, too. Who qualifies?

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 six years may be eligible if discharged for a service-connected disability. In addition, reservists and National Guard members who were activated on or after August 2, 1990, served at least 90 days and were discharged honorably are eligible.

Can I build a home with a VA home loan?

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.

Can you take out a VA loan for a second home or vacation cabin?

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.

Can a veteran obtain a VA loan for the purchase of property in a foreign country?

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.

What is a VA-guaranteed manufactured home loan?

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.

If a borrower has used a VA loan in the past, can that person be eligible again?

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.

I am a veteran who purchased a home with my spouse utilizing my VA eligibility. I am now divorced and my spouse was awarded the home. How do I get my eligibility back?

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.

I heard the VA has an inventory of foreclosed homes. How can I find out more about this?

The Department of Veterans Affairs 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 list the properties.

The article originally appeared on Military.com.