Joe Schmitz

WHO IS ELIGIBLE?

Veterans with active duty service, that was not dishonorable, during World War II and later periods are eligible for VA loan benefits. World War II (September 16, 1940 to July 25, 1947), Korean conflict (June 27, 1950 to January 31,1955), and Vietnam era (August 5, 1964 to May 7, 1975) veterans must have at least 90 days' service. Veterans with service only during peacetime periods and active duty military personnel must have had more than 180 days' active service. Veterans of enlisted service which began after September 7, 1980, or officers with service beginning after October 16,1981, must in most cases have served at least 2 years.

Gulf War. Basically, 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. VA regional office personnel may assist with eligibility questions. Members of the Selected Reserve, including National Guard, who are not otherwise eligible and who have completed 6 years of service and have been honorably discharged or have completed 6 years of service and are still serving may be eligible. Contact the local VA office to find out what is needed to establish eligibility. Reservists will pay a slightly higher funding fee than regular veterans. (See paragraph entitled "Costs of Obtaining a VA Loan").

Members of the Selected Reserve, including National Guard, who are not otherwise eligible and who have completed 6 years of service and have been honorably discharged or have completed 6 years of service and are still serving may be eligible. Contact the local VA office to find out what is needed to establish eligibility. Reservists will pay a slightly higher funding fee than regular veterans. (See paragraph entitled "Costs of Obtaining a VA Loan").

WHAT CAN A VA LOAN BE USED FOR?

• To buy a home, a 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 such as solar or heating/cooling systems, water heaters, insulation, weather-stripping/caulking, storm windows/doors or other energy efficient improvements approved by the lender and VA. These features may be added with the purchase of an existing dwelling or by refinancing a home owned and occupied by the veteran. A loan can be increased up to $3,000 based on documented costs or up to $6,000 if the increase in the mortgage payment is offset by the expected reduction in utility costs. A refinancing loan may not exceed 90 percent of the appraised value plus the costs of the improvements. Check with a lender or VA for details.
• To refinance an existing home loan up to 90 percent of the VA-established reasonable value or to refinance an existing VA loan to reduce the interest rate.
• To buy a manufactured home and/or lot.

WHAT IS A VA-GUARANTEED LOAN?

These loans are made by a lender, such as a mortgage company, savings and loan or bank. VA's guaranty on the loan protects the lender against loss if the payments are not made, and is intended to en courage lenders to offer veterans loans with more favorable terms. The amount of guaranty on the loan depends on the loan amount and whether the veteran used some entitlement previously. With the current maximum guaranty, a veteran who hasn't previously used the benefit may be able to obtain a VA loan up to $417,000.00(upto $793,750. 00 in the county of Honolulu, Hawaii) depending on the borrower's income level and the appraised value of the property. The local VA office can provide more details on guaranty and entitlement amounts.

VA FINANCING -A GOOD DEAL FOR VETERANS

More than 27 million veterans and service personnel are eligible for VA financing. Even though many veterans have already used their loan benefits, it may be possible for them to buy homes again with VA financing using remaining or restored loan entitlement. Before arranging for a new mortgage to finance a home purchase, veterans should consider some of the advantages of VA home loans:

• Most important consideration, no down payment is required in most cases.
• Loan maximum may be up to 100 percent of the VA-established reasonable value of the property. Due to secondary market requirements, however, loans generally may not exceed $417,000.00 (upto $793,750. 00 in the county of Honolulu,Hawaii)
• Flexibility of negotiating interest rates with the lender.
• No monthly mortgage insurance premium to pay.
• Limitation on buyer's closing costs.
• An appraisal which informs the buyer of estimated property value.
• Thirty year loans with a choice of repayment plans.
• Traditional fixed payment (constant principal and interest: increases or decreases may be expected in property taxes and homeowner's insurance coverage); Graduated Payment Mortgage-GPM (low initial payments which gradually rise to a level payment starting in the sixth year); and in some areas, Growing Equity Mortgages-GEMs (gradually increasing payments with all of the increase applied to principal, resulting in an early payoff of the loan.) Hybrid ARMs: VA is authorized to guarantee hybrid ARM loans where the initial rate remains fixed for at least 3 years. The initial adjustment can be as much as 2% if the fixed rate period is 5 or more years. Annual adjustments thereafter are limited to 1 percent. If the initial fixed rate period is 5 or more years, the interest rate on the loan is capped at 6 points above the initial rate. If the fixed rate period is less than 5 years, the initial adjustment is limited to 1 % and the annual cap to 5 percentage points. Traditional ARM loans: VA can also guarantee traditional one year ARM loans where the rate is adjusted annually. Annual adjustments are limited to 1 % and the maximum interest rate increase over the life of the loan is limited to 5 percentage points.
• New homes which are appraised before or during construction are inspected to help ensure compliance with the plans and specifications used for the appraisal and with VA minimum property requirements. All new houses, regardless of when appraised, are covered by either a 1-year builder's warranty or a 1 a-year insured protection plan.
• An assumable mortgage, subject to VA approval of the assumer's credit. Right to prepay loan without penalty.
• VA performs personal loan servicing and offers financial counseling to help veterans avoid losing their homes during temporary financial difficulties. WHAT IS A VA-GUARANTEED LOAN? These loans are made by a lender, such as a mortgage company, savings and loan or bank. VA's guaranty on the loan protects the lender against loss if the payments are not made, and is intended to en courage lenders to offer veterans loans with more favorable terms. The amount of guaranty on the loan depends on the loan amount and whether the veteran used some entitlement previously. With the current maximum guaranty, a veteran who hasn't previously used the benefit may be able to obtain a VA loan up to $417,000.00(upto $793,750. 00 in the county of Honolulu, Hawaii) depending on the borrower's income level and the appraised value of the property. The local VA office can provide more details on guaranty and entitlement amounts.

Eligibility Frequently Asked Questions

Questions about who is eligible for a VA loan and reuse of eligibility for another VA loan.

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: Complete an 1880: You can apply for a Certificate of Eligibility by submitting a completed VA Form 26-1880, Request For A Certificate of Eligibility For Home Loan Benefits, to the Winston-Salem Eligibility Center, along with proof of military service. In some cases it may be possible for VA to establish eligibility without your proof of service. However, to avoid any possible delays, it's best to provide such evidence.

Q: Can my lender get my Certificate of Eligibility for me?

A: Yes, it's called ACE (automated certificate of eligibility). Most lenders have access to the ACE (automated certificate of eligibility) system. This Internet based application can establish eligibility and issue an online Certificate of Eligibility in a matter of seconds. Not all cases can be processed through ACE - only those for which VA has sufficient data in our records. However, veterans are encouraged to ask their lenders about this method of obtaining a certificate.

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 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 shows your date of entry on your current active duty period and the duration of any time lost.

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 it's 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.

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 our Winston-Salem 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 veteran's 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 wasn't 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 veteran's debt was waived by VA, the Government still suffered a loss on the loan. The law does not permit the used portion of the veteran's 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 don't 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 our Winston-Salem 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 our Winston-Salem Eligibility Center.

[NOTE: Also, a surviving spouse who remarries on or after attaining age 57, and on or after December 16, 2003, may be eligible for the home loan benefit. However, a surviving spouse who remarried before December 16, 2003, and on or after attaining age 57, must apply no later than December 15, 2004, to establish home loan eligibility. VA must deny applications from surviving spouses who remarried before December 16, 2003 that are received after December 15, 2004.]

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.