Veterans, service members and others who qualify have what is called an entitlement, which is basically a promise from the Department of Veterans Affairs to provide a financial guaranty on a mortgage issued by one of its approved lenders. The VA doesn’t issue home loans. Instead, it guarantees a portion of each. That guaranty is important to lenders and helps borrowers who might otherwise struggle to secure financing. Having a VA entitlement means you have a financial guaranty from the Department of Veterans Affairs.

VA loans are available to some non-military personnel, including both unmarried and remarried spouses. An unmarried spouse whose veteran died on active duty or because of a disability connected to his or her service is eligible for VA home loan benefits.

Surviving spouses who obtained a VA loan with the veteran before his or her death can also obtain a VA Interest Rate Reduction Refinance Loan, better known as a VA Streamline refinance. Surviving spouses who remarried upon or after turning age 57 and on or after December 16, 2003, may be eligible for a VA home loan. Surviving spouses who remarried before that date are no longer eligible to participate.

The spouse of an active duty member who is listed as missing in action (MIA) or a prisoner of war (POW) for at least 90 days is eligible for one-time use of the VA home loan benefit.

The Certificate of Eligibility is a formal VA document that certifies what entitlement, if any, a military member has for a VA home loan. Obtaining the Certificate of Eligibility is a crucial step in the process. This is the only verifiable way to determine a veteran’s eligibility and entitlement. Without a Certificate of Eligibility, prospective borrowers cannot complete the lending process. Veterans can obtain their Certificate of Eligibility directly from the VA, which typically takes a few weeks. Veterans United Home Loans uses an automated system to get your Certificate of Eligibility in minutes.

There are basic eligibility requirements for veterans and service members, along with members of the Reserves, the National Guard and surviving spouses.

You May Be Eligible for a VA Loan If Any One of the Following are True:
• You served 181 days during peacetime (Active Duty)
• You served 90 days during war time (Active Duty)
• You served 6 years in the Reserves or National Guard
• You are the spouse of a service member who died in the line of duty or because of a service-connected disability.

The only way to verify a veteran’s eligibility for a VA loan is to obtain a Certificate of Eligibility. Veterans can obtain their Certificate of Eligibility directly from the VA, which typically takes a few weeks. Veterans United Home Loans uses an automated system to get your Certificate of Eligibility in minutes.

It’s important to remember that not everyone eligible for a VA loan ultimately secures one. Prospective borrowers still have to satisfy credit and underwriting standards set by both the VA and the lender.

 

Not everyone eligible for a VA loan ultimately secures one. Prospective borrowers still have to satisfy credit and underwriting standards set by both the VA and the lender. Getting prequalified for a loan is a basic step that borrowers can complete online or over the phone. This step gives veterans a sense of their purchasing power and lays the foundation for the credit and underwriting process. But it is only a first step. Veterans with sufficient credit scores will move toward loan preapproval, which is a more formal stage desired by home sellers and real estate agents.

Basic Allowance for Housing, formerly known as Basic Allowance for Quarters, is a key asset that can help service members qualify for and afford a VA mortgage. This monthly housing allowance can be counted as income provided it’s stable and likely to continue. The same is true for other military allowances and forms of bonus pay. Lenders have to make sure the payments are reliable and consistent. Qualified borrowers can use BAH to cover some or all of their monthly mortgage payment.

Veterans who want to fully restore their entitlement after paying off their VA loan can seek a full restoration of their entitlement. The most common example is when a borrower sells their home and uses the sale proceeds to pay off their original mortgage. At that point, the veteran’s previously used entitlement is no longer tied up in the original home. Veterans then have to fill out a VA form and submit documentation to the agency.

Qualified borrowers have two layers of entitlement. Together, the first tier and the second tier combine to create the VA guaranty. The second, additional layer of entitlement can help borrowers who have experienced foreclosures or other major problems with VA loans. Thanks to second-tier entitlement, even a veteran who defaults on a VA loan can still purchase again. It’s important to note that on a second-tier entitlement purchase, there’s a minimum loan amount of $144,000.

No. The VA Loan is designed only for primary residences that are occupied by the owners of the properties.

The VA sets broad requirements and guidelines for military borrowers. There are no income requirements or credit requirements to participate in the VA Loan Guaranty program. The VA simply requires that borrowers represent a satisfactory credit risk. But VA lenders ultimately issue the loans, and they have their own unique requirements, especially when it comes to credit scores. So prospective borrowers have to satisfy both the VA and the agency’s approved lenders in order to secure home financing.

In today’s economic climate, VA lenders are looking for solid credit scores. Lenders will determine at the outset whether your credit score meets its benchmark. But veterans whose score falls short shouldn’t lose hope. We have an entire department dedicated to helping people raise their credit scores and prequalify for the loan they deserve. Our Department of Secondary Approval works one-on-one with veterans, providing simple and concrete steps to boosting their financial health. Best of all, it’s absolutely free.

Veterans and service members can have someone sign on the loan with them, although there are certain restrictions. For a VA loan, that other person, known as a co-borrower, must be either a spouse or another veteran. Parents, friends and significant others who don’t fall under one of those two headings cannot be a co-borrower on a VA loan. Married veterans can obtain a VA loan on their own, but if they live in a community property state, their spouse’s active debt and income will be factored into the loan application.

VA-approved lenders have to make sure prospective borrowers have enough steady income to meet their monthly expenses, including a new mortgage payment. Lenders are generally looking for at least two years of stable employment and income from the same employer and job type. Reliable, documented income can be included from a host of sources, including:
• Base pay & allowances
• Non-military employment
• Retirement income
• Self-Employment
• Commissions
• Rental income
• A spouse’s income
• Alimony/child careTo count income from overtime work, part-time jobs, second jobs and bonuses, veterans need to show that same two-year period of stability. Veterans who are self-employed or who make a living in the building trades, doing seasonal work or working mostly on commission have some additional paperwork hurdles to face. Tax returns for the previous two years will be essential in verifying income.

 

A bankruptcy or foreclosure doesn’t automatically disqualify you from getting a VA loan. But a lot of it depends on when the event occurred. In most cases, veterans will not be able to secure VA financing for two years after a bankruptcy or foreclosure. The VA has some exceptions that allow military members to participate in the program before that two-year mark. But, remember that VA-approved lenders, and not the VA, ultimately issue the loan. Lenders have more stringent standards that rise above the VA’s requirements. And that means there’s almost no way for a borrower to secure financing for at least two years.

Lenders will file paperwork with the IRS to obtain tax records for prospective borrowers. This information plays a crucial role in determining a veteran’s financial health and ability to handle the fiscal responsibilities associated with homeownership. Veterans can help speed through the process by having that information on hand, but it isn’t necessary.

The VA has cap on the fees that veterans can pay to obtain a VA loan. Generally, VA lenders are allowed to charge a 1 percent origination fee, plus another percent to cover administrative and other costs. On a VA loan, sellers can pay up to 6 percent of the loan amount in closing costs and concessions. The one charge most VA borrowers can’t escape is the VA Funding Fee, a mandatory cost that helps keep the home loan program running. Borrowers with service-connected disabilities can receive an exemption from the VA Funding Fee.

The VA Funding Fee is a mandatory fee applied to both purchase and refinance loans. It helps keep the home loan program running. The fee is a percentage of the loan amount, and it changes depending on several factors, including whether it’s a purchase or a refinance, how many VA loans you’ve had in the past and the type of military service. You can see the full breakdown and even calculate your exact fee by visiting VAFundingFee.com.

VA Funding Fee Explained

The VA Funding Fee is paid directly to the Department of Veteran’s Affairs and is the reason they can guarantee this no-money-down loan program. This fee is paid so that VA eligible borrowers can enjoy loan benefits such as $0 down financing and no PMI payments.

VA Funding Fee Chart

The Funding Fee is calculated by looking at 5 different factors: Loan amount, loan type (Purchase or Refinance), type of service, down payment (if any) and prior VA loan use. Take a look at the charts below to see how the va funding fee varies based on these factors.

	Purchase – First Time Use
Down Payment	Active Duty/Retired	Guard/Reserve
$0 Down	2.30%	2.30%
5-10% Down	1.65%	1.65%
10% or More	1.4%	1.4%

	Purchase – Additional Use
Down Payment	Active Duty/Retired	Guard/Reserve
$0 Down	3.60%	3.60%
5-10% Down	1.65%	1.65%
10% or More	1.40%	1.40%

	Cashout Refinance
VA Usage	Active Duty/Retired	Guard/Reserve
1st Time Use	2.30%	2.30%
Additional Use	3.60%	3.60%

	IRRL (Interest Rate Reduction Loan)
VA Usage	Active Duty/Retired	Guard/Reserve
1st Time Use	0.5%	0.5%
Additional Use	0.5%	0.5%

Mortgage rates are shaped by a host of economic factors. Lenders set their rates based on what’s happening in the bond market and in the greater financial landscape. Interest rates change constantly, often multiple times per day, which is why it’s important to talk with your loan officer about when to lock in your rate. As with other lending products, military members with excellent credit can secure better interest rates and loan terms than those with less sterling credit. But, in general, VA loans have consistently lower rates than conventional loans.

Veterans can explore adjustable rate mortgage options with a VA loan. Today, the most common ARM for VA borrowers is either a 3/1 or 5/1 Hybrid, where the borrower gets a fixed interest rate for the first three or five years of the loan term. A low interest rate during those first few years can make a huge difference for veterans who might need cash to pay off other debts or obligations. ARMs are also a potential option for service members who only plan to stay in their homes for three to five years. Not every VA-approved lender offers ARMs. Many states require lenders to have additional compliance disclosures and counseling initiatives in order to satisfy government requirements.

Your credit score plays an important role in determining your mortgage rate. Prospective borrowers with solid credit can expect lower rates and better terms than those with fair to middling scores. The VA requires borrowers to be a satisfactory credit risk in order to qualify for a government-backed loan. VA lenders have their own additional requirements and, in the current lending climate, will pay close attention to an applicant’s score. It’s more important than ever to get a handle on your credit profile, get caught up on any outstanding debts and responsibly use credit. Put yourself in the best position possible when it comes time to start the home-buying process.

On a VA purchase loan, veterans can borrow up to the appraised value of the home, plus some costs and fees associated with the loan. Homebuyers interested in making their home more energy efficient can add up to $6,000 in improvements through an Energy Efficient Mortgage. On a VA Cash-Out Refinance, we can help homeowners refinance up to 100 percent of their home’s value. Homeowners can use that cash to pay bills, renovate their home and other key uses.

Your VA entitlement isn’t a one-time benefit. Borrowers who qualify can utilize their VA home loan benefits over and over. Most veterans will only ever have one VA-backed mortgage at a time. But there are unique situations where veterans can have more than one VA loan at one time. Most of those circumstances are related to relocation needs, including deployments and jobs. But it’s important to remember that VA loans are for primary residences. You can’t use your home loan benefits to purchase investment properties or businesses.

As the nation’s leading dedicated VA lender, we’ve worked hard to make the VA loan process as simple and streamlined as possible. VA loans have less stringent requirements than other lending programs, and that’s one of the key benefits for veterans and active duty personnel. Prospective borrowers have to meet basic financial and credit-related benchmarks to satisfy both the VA and the lender. Veterans receive a financial guaranty from the VA, and that guaranty gives lenders the confidence to issue no-down payment loans with great rates and terms.

The VA has two major refinance programs. One of them, the Cash-Out Refinance, helps homeowners extract cash from their home’s equity while obtaining a lower interest rate. We can help veterans refinance up to 100 percent of their home’s appraised value. Most lenders are currently capped at 90 percent. The process for obtaining a Cash-Out Refinance is similar to the process borrowers go through for a VA purchase loan. Veterans with a conventional or FHA mortgage can refinance into a VA loan using the Cash-Out program.

VA does not set a cap on how much you can borrow to finance your home. However, there are limits on the amount of liability VA can assume, which usually affects the amount of money an institution will lend you. The loan limits are the amount a qualified Veteran with full entitlement may be able to borrow without making a downpayment. These loan limits vary by county, since the value of a house depends in part on its location.

The basic entitlement available to each eligible Veteran is $36,000. Lenders will generally loan up to 4 times a Veteran’s available entitlement without a down payment, provided the Veteran is income and credit qualified and the property appraises for the asking price.

VA borrowers can add up to $6,000 to their loan to make energy efficiency improvements to their home. Known as an energy efficiency mortgage, or EEM, these unique loan products allow homeowners to make select upgrades and repairs to the property in order to maximize energy efficiencies. Spending money at the outset on energy improvements can ultimately lower heating, cooling and other related energy costs for years to come. That monthly savings can be funneled into additional payments to the mortgage principal or dozens of other household necessities. Veterans interested in an EEM should consult with their lender and be sure to arrange for a home energy audit from a professional firm.

The number one reason veterans and active duty borrowers chose the VA loan program is simple: The ability to purchase a home with no money down. That incredible benefit opens the doors of homeownership to thousands of people who might otherwise struggle to secure financing. VA loans also feature no private mortgage insurance, flexible credit and income requirements and consistently lower rates than other loan products. Your VA loan entitlement is a hard-earned benefit. This program provides qualified borrowers with unmatched buying power and flexibility. For the vast majority of veterans, service members and military families, the VA loan program represents the simplest and most powerful path to homeownership.

The best way to start the application process is to speak to one of our VA loan specialists today. Our team can prequalify borrowers over the phone in a matter of minutes. We will gather some of your basic financial information and take a look at your credit score. You’ll then receive our loan application packet and get on the path to preapproval, which is a more involved process that requires a more detailed look at your finances and your ability to handle a mortgage and its associated costs.

VA lenders have to obtain all kinds of official paperwork in order to process a loan, from the borrower’s Certificate of Eligibility to tax returns and other crucial documents. It’s easy for paperwork to get lost over time, so borrowers shouldn’t worry if they can’t locate their discharge documents or other important pieces of paper. We can obtain fresh copies of your most important documents with no hassle. Borrowers can also contact the VA and other entities to secure the paperwork themselves. The lack of this paperwork won’t necessarily derail the loan process, but it’s best to work with the lender as quickly as possible to take care of document needs.

VA loans do not have any kind of prepayment policies. That means borrowers can pay off their loans early without penalty. That’s a significant benefit for homeowners who want to cut down on their interest costs over time. Paying an additional $50 or $100 a month toward your premium can shave off years and tens of thousands of dollars from your 30-year fixed-rate mortgage.

With most loan products, when a home is sold the existing mortgage must be paid off. But there are instances when a homebuyer can take over the loan balance, interest rate and terms of the existing mortgage. This is referred to as “assuming” the loan. VA loans are one of the only fixed-rate mortgages that are assumable. This key difference gives homeowners increased flexibility when the time comes to sell their home.

For the vast majority of veterans, active duty service members and military families, the VA loan represents the most flexible and powerful loan program on the market. . But there are some cases when a VA loan may not represent the best fit. Veterans with significant cash reserves who can cover a 20-percent down payment may want to consider conventional financing. But that isn’t the typical financial situation for most military borrowers. For everyone else, VA loans often make the most financial sense and allow veterans to get the biggest bang for their buck.

The VA has two major refinance programs. One, the Interest Rate Reduction Refinance Loan, better known as a VA Streamline, helps homeowners get into a lower-rate mortgage to reduce their monthly payment. VA Streamlines come with minimal hassle and paperwork. The VA does not require appraisals or credit checks on Streamlines, but some lenders have recently made them mandatory. We are still able to process some Streamlines without an appraisal, which is a tremendous benefit given the decline in home values across the country. Homeowners have to pay closing costs on a VA Streamline. But these can be rolled into the overall loan amount, along with up to $6,000 in energy efficiency improvements.

Veterans and active duty homeowners who qualify can refinance into a VA loan using the program’s cash-out refinance program. The process for obtaining a Cash-Out Refinance is similar to the process borrowers go through for a VA purchase loan, from the income verification and debt-to-income ratio to a home appraisal. Qualified homeowners with conventional or FHA mortgages do not have to take out cash when they refinance into a VA loan. But they are ineligible for the simpler VA Streamline program.

The vast majority of military buyers use their VA loan to purchase or refinance an existing single-family home. But veterans interested in purchasing a condo or building a home from the ground up can also utilize a VA loan. You can use a VA loan:

• To purchase a residence that’s owned and occupied by the veteran.
• To refinance an existing VA-guaranteed or direct loan in order to lower the current interest rate.
• To refinance in order to take out cash.
• To repair, alter or improve a residence owned by a veteran.
• To simultaneously purchase and improve a home
• To make energy-efficiency improvements in conjunction with a VA purchase or refinance loan.
• To purchase up to four one-family residential units in a condo development approved by the VA. One of those four units must be used as the borrower’s primary residence.
• To purchase a farm residence to be owned and occupied by the veteran. The property cannot be a working farm or an income-producing property.

You cannot use a VA loan to purchase vacation homes or income properties