A VA loan is, simply enough, a loan that is backed by the United States Department of Veteran’s Affairs. The loans are not offered directly through government organizations, but through qualified lenders.
So what’s the appeal of a VA loan?
Well to start off with, a VA loan can offer 103.3% financing without the need for certain requirements like private mortgage insurance. A VA loan comes with its own list of requirements, but generally speaking, the program is designed to make things easier for veterans hoping to buy a home or take out a second mortgage. It’s about ease, convenience, getting rid of a few of the headaches and hassles that come with taking out a home loan.
So the first question we have to consider:
Who QualifiesVA Loan Requirements??
If you asked most people to take a guess, what would they say you need in order to qualify for a VA loan?
You have to be a veteran, right? But of course, there’s a little more to it than that.
First of all, you have to contend with the lender’s specific requirements. The backing of the VA means that the lender can offset some of the risks that they are taking in giving out a loan, but they do have to consider their own risk.
In other words: Who may or may not qualify for a VA loan can differ from lender to lender. The requirements will generally be a little more lax than they would be taking out a loan with a lender who is not participating in the VA loan program, but some lenders will go a little easier on you than others, all the same.
Although it will vary from lender to lender, most participating lenders will ask that you have a credit score of at least 620, which is lower than many loans not backed up by the Department of Veteran’s Affairs, but should illustrate that there are a few hurdles to jump on your way to a VA loan.
Not to mention, there are some additional benefits beyond a relatively streamlined application process.
To qualify for a VA loan in the first place, with any lender, you’re going to need a COE, or Certificate of Eligibility, which you can obtain through the government website. Conditions regarding your eligibility depend on factors such as when you served, the length of time, and the character of your service. You need to have been discharged under conditions other than dishonorable, and you have to meet the requirements listed below.
- WWII: 9/16/1940 to 7/25/1947 – 90 total days
- Post-WWII: 7/26/1947 to 6/26/1950 – 181 continuous days
- Korean War: 6/27/1950 to 1/31/1955 – 90 total days
- Post-Korean War: 2/1/1955 to 8/4/1964 – 181 continuous days
- Vietnam War: 8/5/1964 (or 2/28/1961 for those who served in the Republic of Vietnam) to 5/7/1975 – 90 total days
- Post-Vietnam War: 5/8/1975 to 9/7/1980 (or 10/16/1981 for Officers) – 181 continuous days
- 24-month rule 9/8/1980 (or 10/17/1981 for officers) to 8/1/1990 – 24 continuous months or the full period (181 days or more) of active duty
- Gulf War: 8/2/1990 to Present – 24 continuous months or full period (90 days or more) of active duty
- Currently On Active Duty: 90 continuous days
Is That It?
Nope. The rules are a little different for many National Guard members and those who served in the Reserve.
National Guard and Reserve Member Eligibility
- National Guard, Gulf War: 8/2/1990 to Present – 90 days of active service
- Six years of service in the Selected Reserve or National Guard: placed on the retired list, transferred to the Standby Reserve or an element of the Ready Reserve other than the Selected Reserve, or you continue to serve in the Selected Reserve
Eligibility for Surviving Spouses and Other Beneficiaries
For surviving spouses…
- Servicemember missing in action or prisoner of war
- Service member killed in action or from disability related to service
- Remarried but at age 57 or older, and on December 16, 2003, or later
- Spouse of servicemember suffering total disability(this is generally taken on case-by-case basis)
Finally, if you do not seem to qualify according to the above criteria, you may still have your application approved if…
- You served in the US armed forces during WWII
- You have any of the following experience, or similar:
- Public Health Service officers
- United States Military cadets
- Air Force Academy
- Coast Guard Academy
- United States Naval Academy Midshipmen
- National Oceanic & Atmospheric Administration officers
- Merchant seaman with World War II service
If you feel entitled to benefits, it can’t hurt to fill out an application even if you do not see your specific service experience listed above. The Department of Veteran’s Affairs is there to help veterans. The requirements listed above are not so much a “list of demands” or anything of the sort, rather, these are guidelines intended to fast-track the process by making application easier for some veterans.
In other words, if you are a veteran or you were married to a veteran, there’s no reason not to put in an application. It’s not going to cost you anything but a stamp.
Are the Benefits Unlimited?
What’s to stop an enterprising veteran from buying up dozens of houses and condos through the VA loans program and turning a tidy profit to the tune of a few million bucks in the California real estate game?
Well, the benefits do come with their share of limitations. The VA loans program is intended to ensure that those who put themselves on the line in service of this nation never want for a home of their own. If you want to get rich, you still have to do that on your own time.
So what are the limitations?
Essentially, you only get to cash in on your VA loan once. But, you can have your entitlements restored if…
- The purchased property has been sold, and the loan has been paid in full
- A Veteran-transferee who qualifies agrees to assume the loan, substituting their own entitlement for the same amount used by the seller. And these entitlements can likewise be restored if… The veteran has repaid the prior loan in
full,and retains the property purchased with the previous loan
How to Apply
You have to start your application process with a trip to the government website for the Department of Veteran Affairs. The hub page for Certificate of Eligibility will connect you to all the proper forms that you’re going to need based on your military background and current situation.
You’ll want to check with the site to make sure you have all the right papers in order, but here’s a brief rundown of the available forms and who they’re for:
- Veterans, and current or former National Guard and reserve members who have been activated Federal active service: DD Form 14, showing the character of service, and the reason for separation.
- Active Duty Servicemembers, and current National Guard and reserve members who have not been Federal active service: A statement of service. This will need to be signed by, or signed under the direction of, the adjutant, personnel office, commander of the unit, or someone of a higher station. The form needs to show your full name, social security number, date of birth, entry date on active duty, duration of any lost time, and the name of the command providing the information.
- Discharged National Guard members who were not activated for Federal active service: NGB Form 22, a report of separation and record of service, or NGB Form 23, retirement points accounting and proof of the character of service.
- Discharged Selected Reserve members who have not been activated for Federal active service: A copy of your latest retirement points statement, with evidence of honorable service.
- Surviving spouses currently receiving DIC (Dependency and Indemnity Compensation): VA form 26-1817, veterans DD214 if available, and you will want to put your own, and your spouse’s social security numbers on the 26-1817.
- Surviving spouse not receiving DIC: VA form 21-534, the DD214 if available, your marriage license, and your spouse’s death certificate, or a DD form 1300 (report of casualty).
From here there are a number of ways to apply: Online, by mail, or through your lender.
To apply online, you’ll want to start at the VA site’s benefits portal. It’s all fairly self-explanatory, although you may be required to do some faxing. This can be a bit of a pain, so even though it can take a little longer, many choose to apply by mail in order to skip a trip to the local library to pump some dimes into their fax machines.
Applying by Mail
If you’re a servicemember, fill out form 26-1880, request for certificate of eligibility, and any other required documents, get them signed by the appropriate people if necessary, and send them to the below address.
VA Loan Eligibility
Attn: COE (262)
PO Box 100034
Decatur, GA 30031
If you are the surviving spouse, you will want to fill out 26-1817, collect that together with copies of all the required documents, and send that off to the above-listed address.
Applying Through Your Lender
It can be convenient to get your Certificate of Eligibility out of the way on your own time so that you have everything in order when you go to a lender, but if you already know who you’re getting your loan from, there’s no reason not to simplify the whole process and go right through their system to get your COE.
Most lenders participating in the program will have access to the Web LGY system. This is an online-based application that will help to establish eligibility and can get you your COE in seconds flat. Not every servicemember or surviving spouse will be able to be processed through the LGY system, as it depends on what sort of data the records hold. A little bit of legwork may be required on your part, in other words.
The COE remains valid whether or not you wind up borrowing from the lender that helped you to get certified, so there isn’t any real downside to going this route.
Although this data can all seem a little overwhelming the truth is that the process is simpler than you might think. Getting certified is not difficult if you have the records to back your service up, or if they are in the VA database. From there, it’s simply a matter of getting a mortgage that you can be happy with.
If you’re having issues with your credit, there are options available to settle for a portion of debts owed, and there are credit cards created specifically for people with poor or no credit to improve their score. In other words: You probably have a lot more options available to you than you think, no matter where and when you served, and whether you have good, bad or no credit at all.