VA Home Loans are made to eligible Veteran’s by private lenders such as banks, mortgage brokers and direct lenders. The VA guarantees a potion of the loan so the lender is protected against losses if the borrower does not make the payments and defaults on the loan. This VA guarantee effectively replaces the security a lender normally receives by requiring a down payment on the property.

What this means for a participating eligible Veteran is they are able to obtain favorable financing for their home purchase. This includes 100% / no down payment financing for the purchase of a home, without having to pay monthly mortgage insurance. They will also receive a competitive interest rate similar to that of a conventional loan that requires a down payment.

Eligibility:

Active Duty Service Personnel are eligible after having served on continuous active status for at least 90 days.
Prior Service Personnel eligibility is dependent on whether service occurred during Wartime or Peacetime
Wartime Service personnel must have served at least 90 days on active duty and been discharged or released under other than dishonorable conditions. If service was less than 90 days they may be eligible if discharged because of a service connected disability
Peacetime Service personnel have served at least 181 days of continuous active duty and been discharged or released under conditions other than dishonorable. If service was less than 181 days they may be eligible if discharged because of a service connected disability. Contact a VA Loan Specialist to determine whether 181 service days occurred during peacetime periods.
Two Year Requirement Period: If the Veteran’s period of service was between September 7, 1980 (or October 16, 1981 for officers) and August 1, 1990 the Veteran must have completed 24 months of continuous active duty or the full period (at least 181 days) for which the Veteran was called or ordered to active duty, and been discharged or released under conditions other than dishonorable.
Members of the Selected Reserve are eligible if they are not otherwise eligible and have completed at least 6 years in the Reserves or National Guard, or been discharged because of a service connected disability, and
ohave been discharged with an honorable discharge, or
ohave been placed on the retired list, or
ohave been transferred to an element of the Ready Reserve, or
ocontinue to serve in the Selected Reserve

Other Types of Eligibility: Certain US Citizens, surviving spouses, personnel discharged for service connected disability, medical or mental conditions, or reduction in force may be eligible. Please contact a VA Loan Specialist to help determine eligibility.
Acceptable Use of a VA Home Loan

VA Home Loans may be used to purchase homes, town-homes, and condominiums (must be a VA approved condo project) including new homes that are to be built.

VA Home Loans are intended for personal home purchases only and are not eligible to be used on rental or investment properties. The Veteran borrower must certify that they or their immediate family intend to personally occupy the home within 60 days of the closing date.
Pre-Qualifying & Loan Amount

In order to determine the Veteran’s maximum loan amount, it is recommended the Veteran contact a lender familiar with the VA Loan Program to get Pre-Qualified. Pre-qualification includes telling the lender about the borrower’s income, assets and liabilities. Using this information the lender representative will be able to estimate the amount of mortgage payment the Veteran can afford, which subsequently calculates an estimated loan amount and purchase price for a home. Pre-Qualifying is not required, but is recommended so the Veteran knows the price range in which he/she should be looking for homes. Also, many sellers or seller’s real estate agents will require a pre-qualification letter from a lender before considering an offer to purchase a home.

Effective January 1st, 2006 the maximum VA Loan amount is $417,000 in all states except Alaska and Hawaii. In Alaska and Hawaii the maximum amount is $625,500. Having VA Loan eligibility does not automatically qualify a veteran for a loan up to these amounts. The Veteran still must qualify for a loan amount based on the income, assets and liabilities of the Veteran and his/her spouse.
Credit Requirements

The VA Loan underwriter will analyze a Veteran borrower’s credit in order to determine approval. VA Home Loan approval is not completely driven by credit score, but focuses more on the borrower’s timely payments and credit history over the past 12 months. Under certain extenuating circumstances, the borrower can provide a letter of explanation for the underwriter to review and consider when looking at credit issues during the previous 12 month period. Veterans concerned about issues on their credit should contact a VA Loan Specialist to help them determine their eligibility for a VA loan.

No or Limited Credit History: If the Veteran borrower and/or co-borrower have limited or no credit history (as determined by a credit report) then satisfactory payment history must be established, usually on three trade-lines. Trade-lines include things such as utilities, telephone bills and rental history.

Bankruptcy: Having a bankruptcy does not automatically exclude a Veteran from getting a VA Home Loan. Depending on whether it was a Chapter 7 or 13 bankruptcy, one to two years must have passed since the discharge date. The borrower must also show satisfactory credit history and job stability since the bankruptcy. A VA Loan Specialist can help determine whether a borrower with a bankruptcy in their past will qualify for a VA Home Loan.
Co-Borrowers
Generally speaking, only the legally married spouse of an eligible Veteran is allowed to sign as a co-borrower on a VA Home Loan. If the spouse is a co-borrower the spouse’s income as well as assets and liabilities will be included in determining both borrowers’ joint qualification for the loan amount.

Closing Costs
Even when utilizing 100% financing the Veteran borrower will still have closing costs that include lender, title and recording fees, as well as pre-paid escrow account items for homeowner’s insurance and property taxes. The VA Loan Program allows for the seller to pay up to 4% of the loan amount towards the Veteran borrower’s closing costs which enables the borrower to purchase the home with less “cash out of pocket” at closing. Seller paid closing costs should be negotiated and written in to the purchase contract for the home.
There are certain fees that are common in real estate transactions which are considered non-allowable on a VA Loan. The Veteran borrower is not allowed to pay these fees and they are most commonly paid by the seller when purchasing a house using VA Home Loan financing. These fees vary by lender. A VA Loan Specialist at the lender can help determine what the non-allowable fee will be.

VA Funding Fee

The VA Funding fee varies based on several factors including:
•Whether or not it is the Veteran's first VA Home Loan
•Down payment amount, if any
•Whether the Veteran was in the Reserves/National Guard
•If the loan is a re-finance.
In order to determine what the funding fee will be for a specific home loan transaction, the best thing to do is contact a VA Loan Specialist for assistance
Generally for Veteran home buyers using their VA eligibility for the first time, the funding fee is 2.15% of the loan amount. Please note that most of the time the funding fee is not paid “cash out of pocket” but is included or financed in to the loan amount. However, there are certain unusual circumstances where the Veteran borrower would have to pay the funding fee at closing. A VA Loan Specialist can help determine when these circumstances exist.
Certain eligible Veterans are exempt from the funding fee, and it will be waived on their loan transaction. Most commonly these are Veterans who are rated for Military disability or surviving spouses of those who died in service.
Required Documents
In order to obtain a VA Home Loan, the Veteran borrower will need to provide several types of documents regarding both Military service and personal income. These documents include but are not limited to:
•Veteran’s VA Certificate of Eligibility
oThis can be obtained by submitting VA Form 26-1880 to the VA Service center in Winston-Salem, North Carolina; or many VA approved lenders can submit the request online through the ACE (Automated Certificate of
Eligibility) system which can deliver a certificate online in a matter of minutes
•Statement of Service (if on active duty)
•A copy of the Veteran’s DD214 (if the Veteran has been discharged/separated from the Military)
•Past 2 years W2 statements
•One month of most recent LES or pay stubs
•Two months of most recent bank statements.
These documents will be needed in conjunction with the formal 1003 home loan application and disclosures. Additional documents may be required depending on each borrower’s unique situation or circumstances. A VA Loan Specialist at an approved VA lender can help determine the specific documents that will be needed for each borrower, and provide a complete loan package for the borrower.

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