The more you know about the VA home loan program, the more you will realize how little “red tape” there really is in getting a VA loan. These loans are often made without any down payment at all, and frequently offer lower interest rates than ordinarily available with other kinds of loans.

Aside from the veteran’s certificate of eligibility and the VA-assigned appraisal, the application process is not much different than any other type of mortgage loan. And if the lender is approved for automatic processing, as more and more lenders are now, a buyer’s loan can be processed and closed by the lender without waiting for VA’s approval of the credit application.

The VA loan can be used to buy a home (including townhouse or condominium unit in a VA-approved project), to build a home, to simultaneously purchase and improve a home, to improve a home by installing energy-related features, or to buy a manufactured home and/or lot.

On manufactured homes, there must be land included with the home and the home must be at least 24 feet wide. The manufactured home must have an identifiable tag. Most lenders are unwilling to offer VA loans for manufactured homes due to the increased risk these loans often carry.

The nature of your discharge can affect your eligibility for a VA loan. The Certificate of Eligibility process gets complicated for veterans separated from the military with a discharge other than honorable. In these cases the VA checks to see if the discharge was classified dishonorable.

If you had an ‘other than honorable’ discharge, seek help from your local VA office. It’s best to get some expert advice on what additional information to file, where to send the paperwork and what to do if an appeal is necessary. Be sure to include copies of your DD214 form, plus any paperwork or documentation showing that you either didn’t receive a dishonorable discharge, or had your discharge upgraded, modified, or corrected.

A VA approved lender can use an online program called ACE – the Automated Certificate of Eligibility – to get you started in the VA loan process. Unfortunately, the automated system won’t work for everyone. Some people don’t have enough information in the ACE database, and are required to fill out a VA Form 22-1880, commonly referred to as a Request for Certificate of Eligibility. If this applies to you, simply fill out the form and mail it to your regional Eligibility Center along with supporting paperwork including a copy of the DD-214 discharge paperwork.

Don’t send originals of the DD214, a photocopy will do. The certificate of eligibility process can be tricky for veterans who were separated from the military with a discharge other than honorable. In this case the VA must investigate the discharge to insure it was not classified as dishonorable. People who fall into this category should seek help from their local VA office, especially if you need to file an appeal to the results of your request of eligibility.

Obtaining pre-approval for your VA loan amount is an excellent time-saving step. Once you know the exact amount you’re eligible for in your VA home loan, you can begin searching for a home as a ‘serious buyer’. You’ll know in advance exactly what you can afford and what is outside your price range.

It’s the kind of security you’ll be grateful for as you search for the best value for your money. With pre-approval, you avoid wasting time with property that’s out of your price range or sellers who are unsure whether you mean business.

Veterans who shop around will learn it’s possible to get a fixed rate loan, negotiated with the lender of your choice. Another option? The adjustable rate loan, where interest may be adjusted one percent annually, up to five percent over the duration of the loan period. Which to choose? No matter which way you think is best, do your homework, shop around and get the best rate possible. Some make the mistake of taking the first offer that sounds fair, but don’t be intimidated by the process. You may be eager to get the “hard part” over with and get into a home.

Take some time to research the biggest purchase of your life! When in doubt, consult an expert, a legal advisor or a trusted friend in the real estate business. The more research you do, the better you’ll feel at closing time. The VA is in the business of loan guaranty, but the choice of which loan to take is strictly up to you. It’s also a good idea to look for businesses who make a habit of cultivating customers who are veterans–you may find their expertise in VA matters quite valuable to reduce unnecessary waiting times on paperwork.

Some first-time home buyers are misinformed as to the workings of a VA Loan. The Veterans Administration does not normally act as a lending agent. Instead, the VA guarantees a portion of each loan in case the borrowing veteran defaults on the loan. If you are considering any kind of home loan, it’s best to consult a credit counselor and a financial planner to find out what credit rating you already have and what you can do to improve your credit rating before applying for the guaranty.

It’s important to know that a VA home loan guaranty is available only if the veteran meets all other eligibility requirements set forth by the VA and approved lenders.

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. The properties are listed by local listing agents through local Multi Listing Systems (MLS). A list of properties for sale may also be obtained from Ocwen’s website at http://www.ocwen.com. If you are interested in buying a VA-acquired property when it is listed for sale by Ocwen Federal Bank FSB, please contact a local real estate broker of your choice to see the property.

Question:

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

Answer:

When the property is awarded to the veteran’s spouse as a result of the divorce, entitlement cannot be restored unless the ex-spouse refinances the property and / or pays off the VA loan in full or the ex-spouse is a veteran who substitutes their entitlement.

Spouses who are both eligible for VA loan benefits may acquire property jointly, but the amount of guarantee on the loan may not exceed the lesser of 40 percent of the loan amount or $36,000 ($105,250 for certain loans over $144,000).

The maximum guarantee authorized by the VA is 25 percent of the loan amount up to $113,275. The maximum VA home loan is $453,100. The maximum guarantee in the states of HI and AK is 25 percent of the loan amount up to $169,912 . The maximum VA home loan in these states is $679,650.

Those who have been discharged, separated or retired should keep multiple copies of the DD214–your discharge paperwork. It’s the most important military document in your records. This is proof of your military status, whether you are retired, separated, discharged. It also displays the nature of your discharge, and what your status is with the National Guard or a Reserve Unit.

The lack of a DD-214 form can bring some of your VA processes to a halt, but fortunately you can get a replacement copy by writing to the National Personnel Records Center. Enclose a completed form SF-180 along with a letter stating the reason for your request, you name, rank, social security number. If you are a recently discharged military member who separated or retired at an overseas location, remember that your DD-214 form may be delayed overseas for up to a year before it becomes part of the National Record Center archives. If this is the case, you contact the orderly room, First Sergeant or Sergeant Major in charge of where you separated or retired and request a copy directly from your final base.

Check with your lender about interest-rate reduction refinancing on your existing VA loan. This is a great advantage and there’s no need to re-establish VA loan eligibility. Instead, ask your lender to use the VA’s “email confirmation procedure”. You may also re-use your VA loan eligibility for another VA loan.

The requirement here includes having completed payments on the previous note, and you must no longer own the property. When applying for re-eligibility, include copies of the paperwork that proves your old VA loan has been paid off-a “paid-in-full” letter from your bank, or a copy of the “Closing Disclosure.”

A VA certificate of eligibility is renewable on a one-time basis. You qualify if the existing VA loan is paid in full, but you still own the property. Under the rules, you ordinarily must prove the property has been sold, but thanks to the one-time exception you may renew the VA certificate of eligibility. All you need to do is complete VA form 26-1880 and send it to the nearest VA Eligibility Center. Remember that getting released from liability for a VA loan or having a debt waived by the VA is not the same as paying off the loan. In that case you’ll have to pay back the government’s loss. Once that is done, the certificate of eligibility may be renewed.

The idea of buying a building intended as a rental property is sound, but VA mortgages aren’t intended for this purpose. If you buy a home with a VA home loan, you must certify that you intend to “personally” live in the house. There are naturally exceptions made for houses that are in the building stages when the sale is made, but the general rule is you must occupy the house within sixty days of the loan closing.

The occupancy requirement applies to all VA guaranteed loans except one: the Interest Rate Reduction Refinancing Loan or IRRRL. For these loans, the veteran is required to certify that the dwelling was previously occupied as the home.

Veterans who file for bankruptcy are still allowed to use a VA home loan if they are eligible. Unfortunately the process does require a waiting period. You are allowed to purchase another home two years after the “discharge date” of your bankruptcy. Keep in mind that the filing date does not factor in-you must wait the two years after bankruptcy has been discharged. Once you are eligible to buy another home, the usual credit and income requirements apply.

To qualify for a VA home loan, you must fall into a certain debt ratio. Your income, credit card debts and the new indebtedness created by the VA mortgage are all tallied up to see where you land in terms of debt. The maximum debt ratio you may have and still qualify for a VA home loan is 41%. This is only one factor used to determine eligibility, the others include your reliable income and credit rating. If you are considering applying for a VA home loan, you may wish to make an appointment with a financial planner and debt counselor to see how you might improve your standing in advance of the application process.

If you own a home and are considering refinancing, VA refinancing may be just what you need. Under the terms of VA refinancing, your current real estate debt is paid out of the proceeds of a new VA mortgage.

The requirements? The same borrower must use the same property as before. This type of refinancing is also known as a ‘Cash Out’ refinance, and is only good for homes that are used as the owner’s residence. Refinancing may be available for up to 100% of the appraised value plus all closing costs in many cases. Your home must have enough equity to cover the loan. These terms may not be available in all states, depending on local lending laws. Check with your local VA rep to learn more.

A VA home loan has more flexibility than you might think. While many use this benefit to purchase existing homes, there are many other applications. Did you know a VA home loan may be used to purchase and improve a home at the same time? You may also use a VA loan to improve your existing home by increasing energy efficiency. There is also a provision for people to use a VA loan to purchase a manufactured home and lot, under the right conditions. There are many applications for a VA home loan, sometimes all you need to do is ask!

There is a “VA funding fee” required by law. A first-time buyer will pay a little over two percent for a ‘no money down’ loan, and a second time buyer’s fee is just above three percent. The reason for the fee includes the idea that the veteran is reducing taxpayer burden by contributing to the cost of his VA mortgage. There is also a fee for VA refinance loans, and they fall within the same general price guidelines; just above two percent for first-timers and just above three percent for those who borrow again.

While there is a funding fee for a VA home loan, some people are exempt from paying. If you are a veteran getting disability compensation for service-related medical issues, or are entitled to get compensation if you aren’t drawing retirement pay, you are exempt from the VA funding fee for your VA home loan. Also, surviving spouses of those who died in the service, or from service related disabilities are also exempt. It doesn’t matter in this case whether the spouse has any of their own entitlements. Remember that the VA has the last word on who is exempt, and some issues may be dealt with on a case-by-case basis. If you have any doubts, ask your local VA rep to review your service records (or your spouse’s records) and get a determination from the VA.

Veterans who were injured while in service are exempt from paying the VA funding fee if they receive disability compensation or have a disability rating of 10% or higher. Surviving spouses of veterans who died in the line of duty also qualify for a funding fee exemption.

As of January 1, 2020, Purple Heart recipients also qualify to receive a VA funding fee exemption when obtaining a VA home loan.

Remember the VA has the last word on who is exempt, and some issues may be dealt with on a case-by-case basis. If you have any doubts, ask your local VA rep to review your service records (or your spouse’s records) to get a determination from the VA.

It’s true that the legally married spouse of a military member or veteran can co-sign a VA loan. There is no penalty for doing so; the veteran loan is still fully guaranteed by the VA. Two unmarried military members are also able to co-sign on a VA loan with the same results. When a military member or veteran wants to bring an unrelated, non-military cosigner, the VA allows this with one major exception.

The VA guarantee is limited to the amount of the veteran’s interest in the property. Some companies won’t allow these types of “mixed” loans, so you may have a bit of shopping around to do before finding a lender willing to work with you. If you find yourself in this position, give yourself plenty of extra time to hunt for the right lender.

The maximum guarantee authorized by the VA is 25 percent of the loan amount up to $113,275. The maximum VA home loan is $453,100. The maximum guarantee in the states of HI and AK is 25 percent of the loan amount up to $169,912 . The maximum VA home loan in these states is $679,650.

Federal law requires lenders who participate in VA home loans to obey Fair Housing Laws. The law prohibits a great many things including refusal to negotiate, false claims that a residence is sold or otherwise unavailable, and discrimination in financing. Chances are you won’t be confronted by these problems, but in the event you do experience something you perceive to be in violation of Fair Housing laws, you can report the activity to your local VA office. The local office will investigate your complaint, which you file by filling out VA Form 27-8827, Housing Discrimination Complaint form.

It’s true, the VA does get control of properties with VA loan foreclosures. VA foreclosures are offered to the public in the same manner as repossessed HUD and USDA Development homes. If you are interested in one of these foreclosed single family houses, check the HomeSales.gov website to see what might be available in your area.

There are many different agencies offering homes on the website. Eligible buyers should contact a broker to have the Offer to Purchase And Contract of Sale VA form completed and submitted. All the routine eligibility and credit terms apply, as with any housing purchase, including the VA’s property requirements. Check with your lender if you are unsure of the terms and conditions of purchase.

Because your VA loan eligibility depends on your debt ratio, it’s a good idea to start thinking about fixing your credit long before actually filling out loan paperwork. The best way to help yourself out is to follow the advice of a credit counselor, but you can also take steps on your own to increase your eligibility for a VA home loan. Eliminate as much credit card debt as possible. If you can get yourself down to a single card and stay that way for six months, you will be well on your way to improving your debt ratio and your credit rating.

Remember that the maximum debt ratio allowed for approval is 41%, and that your credit rating is also a factor. If you are within a few months of paying off a major debt such as an automobile loan, do so as quickly as possible. You’ll most likely need to allow for credit reporting agencies to “catch up” with your newly paid off cards and loans.

Some first-time home buyers are misinformed as to the workings of a VA Loan. The Veterans Administration does not normally act as a lending agent. Instead, the VA guarantees a portion of each loan in case the borrowing veteran defaults on the loan. If you are considering any kind of home loan, it’s best to consult a credit counselor and a financial planner to find out what credit rating you already have and what you can do to improve your credit rating before applying for the guaranty.

It’s important to know that a VA home loan guaranty is available only if the veteran meets all other eligibility requirements set forth by the VA and approved lenders.

The VA has a great many ways to assist those seeking a VA mortgage, but there are also restrictions. When you purchase a home using a VA home loan, the VA does not offer guarantees that your home is free from defects.

While the VA does conduct an appraisal of the property, this should not be misconstrued as a complete inspection of the property. The VA does not order builders to correct problems or defects in the construction of your home. It’s the buyer’s responsibility to seek expert advice about the condition of a property before purchase.

Additionally, the VA cannot offer legal counsel of any kind. The buyer is responsible for being informed about rights and responsibilities with regard to new property purchases. When in doubt, hire a lawyer or an expert in property evaluation.

A veteran generally cannot get a VA loan to purchase a farm with one notable exception; if the farm has a residence where the veteran intends to live. There is no ‘farming requirement’ for this kind of purchase, but if the veteran does intend to operate a farm business as a major source of income for loan qualification purposes, it’s required to show that the business can turn a profit.

There are other options available to veterans who wish to operate a farm. The Farmers Home Administration does show preference to veterans, and can be used as a way to finance veteran-owned farm operations.

The VA does not allow veteran mortgages for properties outside the United States. The VA does allow purchases in American territories and possessions. These areas include Puerto Rico, Virgin Islands, American Samoa, Guam, and the Northern Mariana Islands. If your proposed purchase is in one of these areas, you should be able to apply in the usual ways, but check with your VA rep for any special requirements or conditions based on the laws which cover lending in those territories.

Regardless of where you purchase a home with a VA loan, the property must meet the basic property requirements set by the VA.

Unless mortgage life insurance is purchased, the responsibility of a veteran mortgage passes to the spouse or the veteran’s estate in the event of his or her death. There is a continued obligation to make payments, but don’t forget the VA’s “Leniency Policy” with regard to forbearance for qualified borrowers who fall on temporary hard times.

Mortgage life insurance can take care of this issue once and for all, but it is not offered through the VA. You’ll need to find a qualified private insurance company to make these arrangements. The terms of such insurance may vary from agency to agency.

Chances are you will make payments to different servicers over the course of your VA mortgage. Selling mortgages from servicer to servicer is common, and sometimes a VA mortgage payment is sent to the old loan holder because notification of the new owner of your loan and your payment became crossed in the mail. If this happens, you may receive a notice of non-payment from the new loan holder.

Don’t delay in contacting the new owner of your VA mortgage to straighten up the problem. While it is technically up to the two servicers to fix the matter, your credit rating and payment schedule could be affected if you don’t act accordingly.

Selling the property purchased with a VA loan releases you from obligation to the VA loan. In the case of a loan assumption, however, this is not automatic. The borrower must notify either the VA or the lender and request that liability be transferred to the new owner. The borrower needs to request a “release from liability” notice from the VA.

There is an exception to this policy for those with loans closed before March 1, 1988. In these cases no notification is required, but it is a very good idea to request a release from liability from the VA anyway.

To qualify for this program, borrowers generally need to have good credit, a down payment of at least 3.5%, a manageable level of debt, and steady income that is sufficient to repay the loan. Those are the minimum requirements.

It is commonly said that FHA is easier to qualify for, when compared to conventional or “regular” home loans. There is some truth to this. But you’ll still need to have good credit.

The official minimum credit score for this program is 500, according to HUD. But mortgage lenders have the final say, and most won’t go that low when approving borrowers. Recent data suggest that 600-and-up is a good score for FHA.

As mentioned above, the lowest possible score for an FHA-insured mortgage loan is 500. But many of our readers have also inquired about the average score among borrowers who use this program. It’s around 683 for home buyers, according to Ellie Mae.

This is another misconception about the program. It’s popular among borrowers with low to moderate income, because it allows for a relatively low down payment. But it’s not limited to this group.

The amount the lender is willing to give you will depend on several factors. Your debt-to-income ratio, or DTI, is one of the most important factors that will influence their decision.

The length of time between the application and final closing can vary based on several factors. It might take anywhere from two weeks to two months, depending on these variables.

Borrowers can be denied financing for many reasons. Understanding these reasons is the first step to avoiding them.

The USDA Loan is a mortgage option available to qualified rural homebuyers. USDA loans are issued by USDA-approved lenders and guaranteed by the U.S. Department of Agriculture (USDA).

When you hear that the USDA loan is guaranteed, it is in reference to the fact that the USDA insures a portion of each loan in the event the borrower defaults on their home loan. This backing, or guarantee, is what gives lenders more confidence in homebuyers and the ability to extend favorable rates and terms.

No, first-time homebuyers and repeat homebuyers alike may use the USDA loan.

There are no maximum loan amount restrictions on USDA loans. An individual’s maximum loan amount is based upon their debts, income and ability to repay.

There are no maximum loan amount restrictions on USDA loans. An individual’s maximum loan amount is based upon their debts, income and ability to repay.

Closing costs vary by lender and location. With USDA loans, it is possible to use gift funds to pay for your closing costs. You will need to ask your loan officer for a gift letter and provide proof of transfer to accompany your loan application.

The USDA offers three refinancing options to for current USDA borrowers: USDA streamline, streamline-assist and non-streamlined refinance. The USDA does not offer a cash-back option.

With the USDA loan program, qualified borrowers can purchase a home without a down payment, saving thousands of dollars in upfront costs.

USDA loans have a one-time upfront fee, known as the USDA guarantee fee, which is 1% of the loan amount. Additionally, the USDA has an annual fee that is currently only .35% of the loan amount and financed into the monthly payments. USDA homebuyers can finance the 1% guarantee fee into the total loan to make for a true $0 down loan.

USDA loans are available in 30-year and 15-year fixed rate terms.

USDA loan rates are often lower than comparable, 30-year fixed-rate conventional mortgages due to the USDA guarantee.

With the USDA loan, your home must be located in what the USDA defines as a rural area.

As with any lending program, the USDA requires that the borrower demonstrate a reasonable ability and willingness to repay the mortgage loan. USDA lenders will view your credit history and income to verify your ability to repay the mortgage.

There is no minimum score required by the USDA; however, to use the USDA’s guaranteed underwriting system (GUS), a borrower must have a 640 credit score or higher.

If you’re still working, you must establish employment to be eligible for the USDA loan, and most lenders will require a minimum of two years of steady employment. If you are self-employed, you are eligible, but will be required to provide two years of federal tax returns to verify your income. Retirees may be able to obtain a USDA loan provided they have sufficient stable income.

You may be eligible for a USDA loan three years after a chapter 7 bankruptcy discharge and one year after filing for chapter 13 bankruptcy.

USDA home loans can be used to purchase any property so long as the property meets USDA property eligibility requirements. This means that you can use USDA loans to purchase foreclosed homes, short sales and homes sold by real estate agencies or banks after a bankruptcy.

No, the USDA loan is for primary residences only. Properties primarily meant for income producing purposes do not qualify.

Since the USDA does not allow buyers to own another property financed by a previous USDA loan, buyers cannot have two USDA loans at the same time. Further, USDA loans must be used for primary residences.

Modular homes can be considered a USDA eligible property, but additional appraisal requirements will apply.