VA Loans: Facts that you should know
American veterans currently serve and have served their country for modest pay and limited financial security. In some cases, a prolonged period outside of the private workforce, or injuries incurred while serving in the U.S. armed forces have resulted in diminished employment and earning potential, leaving some veterans unable to afford a home under regular mortgage and home loan circumstances. That is part of the reason why the United States Department of Veterans Affairs provides guaranteed home loans to help American veterans pay for a home of their own.
VA home loans encompass several advantages over traditional loans, and are available to retired and active duty service personnel, some members of the Selected Reserve, and spouses who fall into certain categories such as the un-remarried wives and husbands of Armed Service personnel who perished from service-related injuries or conditions, or who have been missing in action or a prisoner of war for more than 90 days. The following guidelines may help you determine whether your service makes you eligible for a VA guaranteed loan:
- Active duty – eligibility begins after 90 days of continuous active service, or after 181 days of continuous active non-wartime service.
- Selected Reserve – reservists or National Guard personnel with a minimum of six years service, or those who have been honorably discharged due to disability, and who have been retired, who now serve on a different Ready Reserve, or who remain in the Selected Reserve are all eligible to apply for a VA loan.
- Certain service does not meet the requirement for VA financing, including World War I service and active duty for training in the Reserves or National Guard. Individuals who do not qualify for a VA loan may, however, find themselves eligible for a Housing and Urban Development / Federal Housing Administration veterans’ loan. Contact your regional VA office for more details.
Eligibility for a VA loan is made by Veterans Affairs. Qualified individuals will receive a certificate which they can use when applying for a VA loan. Certificates can be obtained from any VA Eligibility Center upon submission of VA Form 26-1880 and suitable proof of service and discharge conditions. A copy or Certificate in Lieu of Lost or Destroyed Discharge papers is available to veterans who can prove their military service but who may no longer have their original discharge documentation. This certificate can be helpful in obtaining a VA loan.
Each Veterans Affairs home loan supplies an amount of money that it guarantees lenders against loss on loans made to veterans. The maximum entitlement amount is currently $36,000 (or up to $60,000 for certain larger loans), but that figure is always subject to legislative changes.
Contact your local VA office regarding loan figures and eligibility before agreeing to a particular loan. This entitlement amount is a one-time allotment unless a prior VA loan has been paid in full and the property it was used to obtain has been sold. The entitlement may also be restored if a qualified buyer agrees to assume the outstanding loan balance and substitute his or her own entitlement (same amount used on the original loan).
If only part of the entitlement has been used to secure a loan, the remaining balance may be used for a second loan. This ‘remaining entitlement’ option may be particularly useful for veterans who secured a loan using their entitlement when the maximum amount was lower than its present value: in this case, a veteran may use the difference between what he or she was eligible for then and the new maximum to help secure another loan.
When trying to determine which property to buy or fix, veterans should consider that most lenders require the total of the guaranteed entitlement and any cash down payment the veteran is able to make to equal about one quarter of the total sale price of the property in question. This limitation may help veterans decide what they can afford to spend to buy a home, mobile home, townhouse, or VA-approved condominium, to build or repair a home, to refinance an existing home loan, or to purchase a domestic lot for a home.
Finally, VA guaranteed home loans are not administered by Veterans Affairs. Rather, veterans obtain the loans by applying to regularly lending facilities and supplying the necessary proof that they qualify for a VA guarantee. Jeff Melancon, as your agent, will take the time to educate you through this process.