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VA Loan

What is a VA Loan?

In 1944, the Servicemen’s Readjustment Act, also known as the GI Bill, established the VA Loan program under the Veterans Administration. President Franklin D. Roosevelt signed this legislation into law, and it aimed to provide eligible veterans with a home loan that is federally guaranteed and requires no down payment.

To obtain a VA loan, veterans can apply through private lenders such as banks, savings and loans, and mortgage companies. 

Under this program, the Veterans Administration provides insurance to lenders in the event that the borrower defaults on the loan. As a result, lenders can offer lower interest rates and more favorable terms than those of a typical home loan. This program is available in all 50 states and may include reduced closing costs and no penalties for prepayment.

Furthermore, services are available to veterans who are at risk of defaulting on their loans. The VA home loan program is available to military personnel who have served for at least 181 days during peacetime, 90 days during war, or to the spouse of a serviceman who was either killed or missing in action.

VA Loan Eligibility 

Wartime/Conflict Veterans

  • Veterans who were NOT Dishonorably Discharged, and served at least 90 days

  • World War II – September 16, 1940 to July 25, 1947

  • Korean Conflict – June 27, 1950 to January 31, 1955

  • Vietnam Era – August 5, 1964 to May 7, 1975

  • Persian Gulf War – Check with the Veterans Administration Office

  • Afghanistan & Iraq – Check with the Veterans Administration Office

  • Veterans Administration website www.va.gov

 

Peacetime Service

At least 181 days of continuous active duty with no dishonorable discharge. If you were discharged earlier due to a service-related disability you should contact your Regional VA Office for eligibility verification.

  • July 26, 1947 to June 26, 1950

  • February 1, 1955 to August 4, 1964, or May 8, 1975 to September 7, 1980 (Enlisted), or to October 16, 1981 (Officer)

  • Enlisted Veterans whose service began after September 7, 1980, or officers who service began after October 16, 1981, must have completed 24-months of continuous active duty and been honorably discharged

 

Reserves and National Guard

  • Certain U.S. Citizens who served in the Armed Forces of a government allied with the United States during World War II.

  • Surviving spouse of an eligible Veteran who died resulting from service, and has not remarried.

  • The spouse of an Armed Forces member who served Active Duty, and was listed as a POW or MIA for more than 90-days.

What type of home can you get with a VA Loan?

A VA home loan must be used to finance your personal residence within the United States and its territories. You have choices for the type of home you purchase:

  • Existing Single-Family Home

  • Townhouse or Condominium in a VA-Approved Project

  • New Construction Residence

  • Manufactured Home or Lot

  • Home Refinances and Certain Types of Home Improvements

Benefits vs Disadvantages of VA Loans

Benefits:

  • 100% Financing & No Down Payment Loans

  • No Private Mortgage (PMI)

  • No Penalties for Prepaying the Loan

  • Competitive Interest Rates

  • Qualification is Easier than a Conventional Loan

  • Sellers Pay Some of the Closing Costs

  • Can be combined with additional down payment assistance to reduce closing costs

Disadvantages:

  • VA Loans made prior to March 1, 1988 can be assumed with no qualifying of the new buyer. If the buyer defaults the property the Veteran homeowner may be liable for the funds.

  • Some sellers are hesitant to work with someone obtaining a VA Loan because it takes longer than a conventional loan to process.

  • Sellers are often asked to pay a portion of closing costs and therefore less likely to negotiate the sales price of the home.

Applying for a VA Loan

You can apply for a VA Loan with any mortgage lender that participates in the program. In addition to the application requirements from your lender, you will need the following at application time:

  • Certificate of Eligibility from the Veterans Administration by submitting a completed VA Form 26-1880.
  • Proof of Military Service from a VA Eligibility Center

Getting a second VA Loan 

Your eligibility for VA Loan benefits can be restored and reused under certain circumstances. If you have paid off your previous VA Loan and no longer own the property, your eligibility can be reinstated. Alternatively, if you have paid off your previous VA Loan but still own the property, you may be eligible for a one-time restoration of your eligibility.

To restore your eligibility, you need to submit a completed VA Form 16-1880 to the VA Eligibility Center. It’s advisable to include evidence that your prior loan has been fully paid and, if applicable, that the property has been disposed of to avoid processing delays. You can provide a paid-in-full statement from your former lender or a copy of the HUD-1 settlement statement to support your request.