United States Department of Veterans Affairs
United States Department of Veterans Affairs

Cleveland Regional Loan Center

Frequently Asked Questions

Eligibility
Pre-Loan
Post-Loan

 

 

 

 

 

 

 

        Eligibility:

Q: How do I apply for a VA guaranteed loan?

A: You can apply for a VA loan with any mortgage lender that participates in the VA home loan program. At some point, you will need to get a Certificate of Eligibility from VA to prove to the lender that you are eligible for a VA loan.

Q: How do I get a Certificate of Eligibility?

A: VA determines your eligibility and, if you are qualified, VA will issue you a Certificate of Eligibility to be used in applying for a VA loan.

To request a certificate from VA, you must complete VA Form 26-1880, Request For A Certificate of Eligibility For Home Loan Benefits, and submit it to the VA Eligibility Center. If you have been discharged from regular active duty, it may be possible to obtain a determination without providing evidence of your military service. However, it is best to provide such evidence with your VA Form 26-1880 to prevent possible delays in processing your request.

Many lenders also have access to an Internet based, Automated Certificate of Eligibility system called ACE. The ACE system allows lenders to input certain data about the veteran. If the veteran's records are in VA's corporate database and the veteran is eligible for a certificate of eligibility, the system will issue a certificate online that can be printed using the lender's printer.

Q: What is acceptable proof of military service?

A: If you are still serving on regular active duty, you must include an original statement of service signed by, or by direction of, the adjutant, personnel officer, or commander of your unit or higher headquarters which identifies you and your social security number, and provides your date of entry on your current active duty period and the duration of any time lost.

If you were discharged from regular active duty after January 1, 1950, a copy of DD Form 214, Certificate of Release or Discharge From Active Duty should be included with your VA Form 26-1880. If you were discharged after October 1, 1979, DD Form 214 copy 4 should be included. A PHOTOCOPY OF DD214 WILL SUFFICE.....DO NOT SUBMIT AN ORIGINAL DOCUMENT.

If you were discharged from the Selected Reserves or the National Guard, you must include copies of adequate documentation of at least 6 years of honorable service. If you were discharged from the Army or Air Force National Guard, you may submit NGB Form 22, Report of Separation and Record of Service, or NGB Form 23, Retirement Points Accounting, or itís equivalent. If you were discharged from the Selected Reserve, you may submit a copy of your latest annual points statement and evidence of honorable service. Unfortunately, there is no single form used by the Reserves or National Guard similar to the DD Form 214. It is your responsibility to furnish adequate documentation of at least 6 years of honorable service.

If you are still serving in the Selected Reserves or the National Guard, you must include an original statement of service signed by, or by the direction of, the adjutant, personnel officer, or commander of your unit or higher headquarters showing the length of time that you have been a member of the Selected Reserves. Again, at least 6 years of honorable service must be documented.

If you have been activated, certain members of the reserves and national guard who may not have fulfilled their 6 years of required duty, may be eligible for a VA home loan by serving 90 days of active duty war time service with an honorable discharge. VA would require Form DD214 as proof of their war time service.

Q: How can I obtain proof of military service?

A: Standard Form 180, Request Pertaining to Military Records, is used to apply for proof of military service regardless of whether you served on regular active duty or in the selected reserves. This request form is NOT processed by VA. Rather, Standard Form 180 is completed and mailed to the appropriate custodian of military service records. Instructions are provided on the reverse of the form to assist in determining the correct forwarding address.

Q: I have already obtained one VA loan. Can I get another one?

A: Yes, your eligibility is reusable depending on the circumstances. Normally, if you have paid off your prior VA loan and disposed of the property, you can have your used eligibility restored for additional use. Also, on a one-time only basis, you may have your eligibility restored if your prior VA loan has been paid in full but you still own the property. In either case, to obtain restoration of eligibility, the veteran must send VA a completed VA Form 26-1880 to the Eligibility Center. To prevent delays in processing, it is also advisable to include evidence that the prior loan has been paid in full and, if applicable, the property disposed of. This evidence can be in the form of a paid-in-full statement from the former lender, or a copy of the HUD-1 settlement statement completed in connection with a sale of the property or refinance of the prior loan.

Q: I sold the property I obtained with my prior VA loan on an assumption. Can I get my eligibility restored to use for a new loan?

A: In this case the veteranís eligibility can be restored only if the qualified assumer is also an eligible veteran who is willing to substitute his or her available eligibility for that of the original veteran. Otherwise, the original veteran cannot have eligibility restored until the assumer has paid off the VA loan.

Q: My prior VA loan was assumed, the assumer defaulted on the loan, and VA paid a claim to the lender. VA said it wasnít my fault and waived the debt. Now I need a new VA loan but I am told that my used eligibility can not be restored. Why?

Or,

Q: My prior loan was foreclosed on, or I gave a deed in lieu of foreclosure, or the VA paid a compromise (partial) claim. Although I was released from liability on the loan and/or the debt was waived, I am told that I cannot have my used eligibility restored. Why?

A: In either case, although the veteranís debt was waived by VA, the Government still suffered a loss on the loan. The law does not permit the used portion of the veteranís eligibility to be restored until the loss has been repaid in full.

Q: Only a portion of my eligibility is available at this time because my prior loan has not been paid in full even though I donít own the property anymore. Can I still obtain a VA guaranteed home loan?

A: Yes, depending on the circumstances. If a veteran has already used a portion of his or her eligibility and the used portion cannot yet be restored, any partial remaining eligibility would be available for use. The veteran would have to discuss with a lender whether the remaining balance would be sufficient for the loan amount sought and whether any down payment would be required.

Q: Is the surviving spouse of a deceased veteran eligible for the home loan benefit?

A: The unmarried surviving spouse of a veteran who died on active duty or as the result of a service-connected disability is eligible for the home loan benefit. If you wish to make application for the home loan benefit as a surviving spouse, contact the Eligibility Center. In addition, a surviving spouse who obtained a VA home loan with the veteran prior to his or her death (regardless of the cause of death), may obtain a VA guaranteed interest rate reduction refinance loan. For more information, contact the Eligibility Center.

Q: Are the children of a living or deceased veteran eligible for the home loan benefit?

A: No, the children of an eligible veteran are not eligible for the home loan benefit.

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Pre-loan:

What Is A VA Guaranteed Home Loan?

VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fail to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms.
What is pre-purchase counseling and why is it helpful?

Pre-purchase counseling gives a person information on (1) the process of buying a home, (2) the key players in the home buying process, and (3) debt management. The goal is to create a well informed homebuyer. While VA does not require such counseling, we strongly recommend it. There is usually no charge for the housing counseling.

To locate a housing counseling office call (800)217-6970 or visit HUDs website at http://www.hud.gov/. The Department of Housing and Urban Development (HUD) maintains both the phone number and website.

Does my entitlement guaranty that I will get a home loan?

No, VA cannot compel a lender to make a loan that would violate their lender policies. Lenders must also comply with VA income and credit standards. If a lender is unwilling to make a loan to you, we can only suggest that you try other lenders.

How much is my entitlement?

Entitlement for a VA home loan is broken down into two different groups. The first group of entitlement is called basic entitlement and it amounts to $36,000. Basic entitlement is used to guaranty VA home loans up to $144,000. Effective December 10, 2004, VA also changed the amounts for bonus entitlement for loans over $144,000. That bonus entitlement changes annually and varies depending on the county where the property is located. The typical amount of bonus entitlement for 2009 is $68,250. That amount combined with the basic entitlement of $36,000 allows veterans who qualify to obtain a VA home loan with no down payment, up to $417,000 or more depending on the county. If you have used some of your basic entitlement, you may be eligible to use the remaining basic and bonus entitlement. Lenders will generally lend up to 4 times your available entitlement without requiring a down payment, provided your income and credit qualify and the property appraises for the asking price.

Is there a maximum loan limit?

Effective December 10, 2004, each year the maximum VA home loan amount will change to an amount indexed to the Federal Home Loan Mortgage Corporation's (Freddie Mac) maximum conforming loan amount. Effective October 10, 2008 the Veterans Benefits Improvement Act of 2008 changed the maximum VA home loan to meet the revised Freddie Mac conforming loan limits. The loan amount for 2009 is $417,000 in most counties, but that legislation also allows for higher loan amounts depending on whether the veteran is looking to purchase a home in what is deemed a "high cost" county by Freddie Mac. In some cases, the veteran can exceed the $417,000 loan amount, with a down payment that is equal to 25% of the amount in excess of the $417,000. Veterans should inquire with their lender with regard to this provision. In order to purchase a home using the VA maximum loan amount, veterans would be required to have sufficient entitlement. Secondary market participants generally require at least a 25 percent guaranty on VA home loans.

How do I get a Certificate of Eligibility?

You must complete VA Form 26-1880, Request for a Certificate of Eligibility for VA Home Loan Benefits and submit it to the VA Eligibility Center along with acceptable proof of service as described on the instruction page of the form.

How do I obtain a VA Home Loan?

  1. Select a home and discuss the purchase with the seller or selling agent. Sign a purchase contract conditioned on approval of your VA home loan.
  2. Select a lender. Present them with your Certificate of Eligibility or have the lender obtain an Automated Certificate of Eligibility (ACE). The lender will then complete a loan application.
  3. The lender will develop all credit and income information. They will also request VA to assign a licensed appraiser to determine the reasonable value for the property. A Certificate of Reasonable Value will be issued. Note: You may be required to pay for the credit report and appraisal unless the seller agrees to pay.
  4. The lender will let you know the decision on the loan. You should be approved if the established value and your credit and income are acceptable.
  5. You (and spouse) attend the loan closing. The lender or closing attorney will explain the loan terms and requirements as well as where and how to make the monthly payments. Sign the note, mortgage, and other related papers.
  6. The loan is sent to VA for guaranty.

What are the benefits of a VA home loan?

  • Equal opportunity.
  • No down payment (unless required by the lender or the purchase price is more than the reasonable value of the property).
  • Buyer informed of reasonable value.
  • Negotiable interest rate.
  • Ability to finance the VA funding fee (plus reduced funding fees with a down payment of at least 5% and exemption for veterans receiving VA compensation).
  • Closing costs are comparable with other financing types (and may be lower).
  • No mortgage insurance premiums.
  • An assumable mortgage.
  • Right to prepay without penalty.
  • For homes inspected by VA during construction, a warranty from builder and assistance from VA to obtain cooperation of builder.
  • VA assistance to veteran borrowers in default due to temporary financial difficulty.

What can VA not do?

  • Guarantee that a home is free of defects. VA guarantees only the loan. It is your responsibility to assure that you are satisfied with the property being purchased. The VA appraisal is not intended to be an "inspection" of the property. You should seek expert advice (a qualified residential inspection service), as necessary, BEFORE legally committing to a purchase agreement.
  • If you have a home built, VA cannot compel the builder to correct construction defects although VA does have the authority to suspend a builder from further participation in the home loan program.
  • VA cannot guarantee that you are making a good investment.
  • VA cannot provide you with legal services.

Is a guaranteed loan a gift?

No, it must be repaid, just as you must repay any money you borrow. If you fail to make the payments you agreed to make, you may lose your home through foreclosure.

Can I get a loan for a home outside of the United States?

Unfortunately, the law only allows VA to guaranty loans on property in the United States, its territories, or possessions.

Can I get a VA loan if I have had a bankruptcy in the last few years?

The fact you and/or your spouse have been adjudicated bankrupt does not in itself disqualify you for a VA home loan. The following rules apply:

  • If the bankruptcy was discharged more than 2 years ago, it may be disregarded
  • If the bankruptcy was discharged within the last 1 to 2 years, it is probably not possible to determine that you and/or your spouse are a satisfactory credit risk unless both of the following requirements are met:
    • you and/or your spouse have reestablished satisfactory credit, and
    • the bankruptcy was cause by circumstances beyond you and/or your spouses control (such as unemployment, medical bills, etc.)
  • If the bankruptcy was discharged within the past 12 months, it will not generally be possible to determine that you and/or your spouse are satisfactory credit risks.

Why do I have to pay a fee for a VA home loan? Since I paid a fee for my first loan, why is there a larger fee for my second loan?

The VA funding fee is required by law. For loans with no down payment, the fee is currently 2.15 percent for veterans who served on active duty, and 2.4 percent for reservists and national guard members. The funding fee is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a down payment is 3.30 percent. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment. For veterans who make a down payment of at least 5 percent or at least 10 percent, the funding fee is reduced. Veterans should consult their mortgage lender regarding the benefits of putting a down payment towards their VA home loan. The effect of the funding fee on a veteran's financial situation is minimized since the fee may be financed in the loan.

I want to buy a house with a VA loan. Do I need to occupy the property?

The law requires that you certify that you intend to occupy the property as your home. This requirement is considered satisfied if you actually intend to occupy the property as your home and in fact so occupy it when the loan is closed or within a reasonable time afterward.

I am a single veteran stationed overseas and want to buy a home in my home town. My friends who are married can do this with their spouses occupying the property in their place, but VA says I can't do this with my parents or other relatives occupying on my behalf. Isn't this discrimination against single veterans?

The law specifically provides that occupancy by the veteran's spouse satisfies the personal occupancy requirement. The law makes no provision for occupancy by any other relatives as a substitute for personal occupancy by the veteran.

May a veteran join with a non veteran who is not his or her spouse in obtaining a VA loan?

Yes, but the guaranty is based only on the veteran's portion of the loan. The guaranty cannot cover the non-veteran's part of the loan. Consult lenders to determine whether they would be willing to accept applications for joint loans of this type. Lenders that are willing to make these types of loans will likely require a down payment to cover risk on the unguaranteed, non-veteran's portion of the loan. Unlike other loans, the lender must submit joint loans to VA for approval before they are made.

Both incomes can be used to qualify for the loan. However, the veteran's income must be sufficient to repay at least that portion of the loan related to the veteran's interest in (portion of) the property and the non-veteran's income adequate to cover the rest.

If a veteran dies before the loan is paid off, will the VA guaranty pay off the balance of the loan?

No. The surviving spouse or other co-borrower must continue to make the payments. If there is no CO-borrower, the loan becomes the obligation of the veteran's estate. Mortgage life insurance is available but must be purchased from private insurance sources.

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Post-Loan:

Q: My home was appraised by VA and now I am having problems with its condition. Wasn't the appraisal an inspection of the property and can't VA help me with these problems?

A: Although the VA fee appraiser must view the property from both the exterior and interior to determine its overall condition, the appraisal process is not intended to be an "inspection" of the property. While the appraiser is an experienced observer, and is required to recommend needed repairs based upon his or her observations while completing the appraisal, the appraiser is not expected to recommend cosmetic repairs, ensure that mechanical, electrical and plumbing systems work properly, climb on the roof, etc. VA cannot guarantee that all defective conditions will be seen by the appraiser, or that the property will otherwise be satisfactory to the buyer in all respects, and we have no authority to assist veteran homeowners with the correction of defects in existing homes. VA encourages homebuyers to satisfy themselves that the home they intend to purchase is in a condition that is acceptable to them.

Q: I purchased a newly constructed home that was inspected by VA (or HUD/FHA,) during construction and I have complaint items which the builder is not taking care of. Is there anything VA can do to help me?.

A: If the new home was inspected by a fee compliance inspector assigned by VA or HUD during construction, VA has complaint processing procedures that are used to attempt to get the builder to correct construction defects which the VA determines are the builder's responsibility. A complaint must be registered with VA within the first year of ownership. Ultimately, VA does not have the authority to force a builder to make corrections to a property. Also, some problems about which a veteran complains may be determined by VA to be within minimum standards of acceptable building practice. In such cases, VA will not look to the builder for correction. However, when builders refuse to correct items which VA determines are their responsibility to correct, VA will take administrative sanctions against them and refuse to do further business with them. In the end, some veterans may still need to look to the legal system to get acceptable redress from the builder.

Q: My lender has increased my payments into the escrow account for taxes and insurance. What can I do?
or
Q: The amount my lender is collecting for taxes and insurance doesn't seem right. What can I do?

A: VA does NOT require lenders to maintain escrow accounts. VA does require that lenders ensure that the property is covered by sufficient hazard insurance at all times and that property taxes are paid. Most lenders decide to use escrow accounts to do this, but they are not required by VA and VA has no standards governing them.
They are governed by RESPA which is administered by the US Dept. of Housing and Urban Development. For more information, see http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm

Q: Does having a VA loan limit a veteran's right or ability to sell the property?

A: No. A veteran may sell the property to a veteran or non-veteran at any time. However, if the loan was closed after March 1, 1988, and it will be assumed, the qualifications of the assumer must be reviewed and approved by the lender or VA.

Q: When a veteran sells the property to someone who will assume the existing VA loan, is the veteran released automatically from personal liability for repayment of the loan?

A: No. If the loan was closed after March 1, 1988, the lender or VA must be notified and requested to approve the assumer and grant the veteran release from liability. If the loan was closed prior to March 1, 1988, the loan may be assumed without approval from VA or the lender. However, the veteran is strongly encouraged to request a release of liability from VA in order to avoid owing a debt to the Government if the loan assumer (or a subsequent assumer) fails to pay the loan.

Q: If a veteran obtains a release of liability, is restoration of entitlement automatic?

A: No. The assumer must not only qualify from a credit and income standpoint, but he or she must have sufficient entitlement and agree to substitute it for that used by the original veteran in obtaining the loan and meet occupancy requirements,

Q: If a veteran has trouble repaying the loan, what should he or she do?

A: It is best to talk with the lender as soon as possible to explain why the payments are late and when and how those late payments will be made. If there was a job loss, divorce, or other serious problem, and the regular monthly payments cannot be made, then it may be best to sell the home to avoid foreclosure. VA may be able to assist in arranging a repayment plan or other alternative to foreclosure. VA offers home loan counseling through 46 of its regional offices, and a veteran can call the toll-free number (800-827-l000) for the nearest office to request a call-back from a Loan Service Representative.

Q: What is VA refunding?

A: When VA refunds a loan, the loan is purchased from the private lender. VA only refunds a loan when the veteran has had problems making the payments due to circumstances beyond his or her control, the problems have improved so that payments can now be made or will be in the near future, but the loan holder is not willing to wait before taking action to terminate the loan. Refunding is rare because most lenders prefer to work out the problems, if at all possible, rather than selling the loan to VA and thereby giving up the right to future income from that loan.

Q: How does a VA compromise claim payment work?

A: When a veteran attempts to sell his or her home and the expected proceeds from the sale are not enough to pay off the existing loan, and the veteran has no other source of funds to complete the transaction, a VA compromise claim pays the difference. As with any claim payment by VA, the veteran usually remains liable to VA for the amount of the claim payment. However, the compromise claim is usually less than the claim which would have been payable if the sale had fallen through, the veteran had failed to make the loan payments, and the lender had foreclosed on the loan.

Q: If a veteran dies before the loan is paid off, will the VA guaranty pay off the balance of the loan?

A: No. The surviving spouse or other co-borrower must continue to make the payments. If there is no co-borrower, the loan becomes the obligation of the veteran's estate. Mortgage life insurance is available but must be purchased from private insurance sources.

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