FAQ’s about VA Loans
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.
- How can I obtain proof of military service?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..
- I have already obtained one VA loan. Can I get another one?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 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.
- 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?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.
- 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 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?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.
- 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?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.
- Is the surviving spouse of a deceased veteran eligible for the home loan benefit?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.
- 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 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.
- Does my entitlement guarantee 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?Your basic entitlement is $36,000. For loans in excess of $144,000 to purchase or construct a home, additional entitlement up to an amount equal to 25 percent of the VA county loan limit for a single family home may be available. VA county loan limits, which can change yearly, are available at this link. The loan limits are the amount a qualified veteran with full entitlement may be able to borrow without making a downpayment.
- How do I get a Certificate of Eligibility?
Web LGY: It may be possible to obtain a Certificate of Eligibility from your lender. Most lenders have access to the Web LGY 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 Web LGY – 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.
You can apply for a Certificate of Eligibility by submitting a completed VA Form 26-1880, Request For A Certificate of Eligibility , 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.
- How do I obtain a VA Home Loan?Here are the steps:
- Select a home and discuss the purchase with your Realtor, sometimes called a buyer’s agent. Sign a purchase contract conditioned on approval of your VA home loan.
- Select a lender, present them with your Certificate of Eligibility if available, and complete a loan application. The lender can also obtain a Certificate of Eligibility on your behalf.
- 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.
- 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.
- 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.
- What are the benefits of a VA home loan?There are many 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.
- What is a Rate Lock?Mortgage rates can change daily, even hourly. If your interest rate is locked then your rate will not change between when you get your interest rate locked and closing, as long as you close within the specific time frame and there are no changes to the application.
- I have had my offer accepted, now what are the next steps?
You have already gone through the preapproval process and you have had your offer accepted, now what are the next steps?
- Your Real Estate Agent sends the sales contract to your Loan Originator
- Once the Loan Originator receives the contract, they will work on the Loan Estimate
- You will then come in to sign disclosures
- The appraisal will be ordered
- Now your file will be sent to processing
- Conditional approval will be sent from lender for any further documentation that is needed
- Appraisal is now returned with value of home and any repairs that may need done
- You file will then be in line for clear to close
- Once your file is cleared to close you will then make an appointment with title company to sign final documents
- Your loan is now ready to fund!
- What are Closing Costs?Closing costs are fees associated with your loan transaction that are paid at the closing of the transaction. Closing costs vary by lender, but the following are the most typical closing costs and how they are determined:
Discount Points – An optional additional cost to you to lower your interest rate
Appraisal Fee – Verify the value of the home
Credit Report – Cost of ordering the credit report of Experian, Transunion, and Equifax
Recording Fee – The documents that you sign at closing that are sent to the Register of Deeds
Title Insurance – Cost of the title search to make sure all taxes have been paid on the property
Closing Fee – The closing fee is paid to the title company for handling the closing of your transaction and for properly transferring title from sellers to buyers
- I have had a foreclosure in the past, can I still use my VA home loan?
If you are a veteran and looking to purchase a home with your VA home loan, but you have had a foreclosure in the past, do not worry, you can qualify for your earned VA home loan. Most veterans think that if they have had a foreclosure that they will lose their benefit, that is not the case. There is a waiting period that the VA requires, so you are able to qualify after 2 years of the recorded date of the foreclosure. This waiting period allows you to get your credit score back to where it needs to be.
- Who orders the VA appraisal?
The VA appraisal is ordered by the lender. The appraiser is not an employee of the lender, but is an independent, licensed VA approved appraiser. The appraiser is assigned to a property by a first come, first serve basis by the nearest VA regional loan center. You cannot personally select the appraiser for the subject property nor can you demand that the appraisal report be back by a certain time. The appraiser has 14 business days to get the appraisal report back, starting from when they were first assigned to the subject property.
- What is a VA Jumbo Loan?
The VA jumbo loan is a loan that is for veterans that are looking to purchase over the conforming loan limit. The VA sets loan limits according to the county, for example in most counties of Oregon the loan limit is $424,100. When the veteran exceeds the county loan limit, he or she is required to apply for the VA jumbo loan, which requires a small down payment. The required down payment is typically much lower than conventional jumbo loans.
- Can I use my VA home loan to purchase a condo?
Some people like the low maintenance and amenities of living in a condo, if that is you, then you will be happy to hear that you can purchase a condo with your VA home loan. The only challenge is finding a condo that is VA approved, to find that out go to the VA condo report and search for the condo that you are interested in.
- Can I use my VA home loan to build a house?
The VA home loan is a great benefit to all veterans! The VA does allow new construction, but finding a lender to do it is the hard part. The reasoning behind that, is because the VA loan is 100% financing, most construction loans require a down payment and lenders will not do a construction loan without any money down. The best thing to do if you are looking to build a home is to first get a construction loan, then once the home is complete you can refinance into a VA home loan for your permanent financing.
- What does my mortgage payment cover?
Most mortgage payments have four parts that your money goes toward:
- Principal – the repayment of the amount you have actually borrowed for your home.
- Interest – the payment to the lender for the money you have borrowed.
- Homeowners Insurance – A monthly amount to insure property against loss from fire, smoke, theft other hazards.
- Property taxes – Annual city/county taxes assessed on the property.
During the life of the loan, you will pay more in interest than you will in principal in the first stages of the loan. But, it will change in the final years of the loan where you will pay more in principal than in interest.
- What is Earnest Money?
We get this question frequently from first time home buyers, what is earnest money? Earnest money is an important part of the home buying process. It is a money deposit that shows the sellers you are a committed buyer to the sale. Usually you put a deposit down of 1%-5% of the home purchase price, depending on the price. The money goes to the title company, where they “hold” the earnest money deposit and this money can either go towards the purchase price or be refunded to the buyer once the sale closes.
- Can I use my VA home loan to purchase a rental property?
Some veterans are interested in using their VA home loan benefit to purchase a property to rent out to others. But, when the veteran borrower signs the papers for that property, they are required to certify that property as their primary residence. Don’t worry though, there is the option where a veteran can purchase a multi-unit property (up to 4 units) and can rent out the other empty units to earn rental housing income. The veteran still needs to meet the occupancy requirements of one of the units and make it their primary residence, but there are no rules stating that they cannot rent out the other units.
- Am I able to include overtime and bonus pay when getting preapproved?
When we are calculating income we have to evaluate three major things: is the income stable and reliable? Is it anticipated to continue in the foreseeable future? And is it an sufficient amount? Generally such income cannot be seen as stable and reliable if it has been received for less than 2 years. That being said, this same factor also takes into account for overtime and bonus income. When we are taking overtime and bonus into the calculation for the preapproval, per the VA handbook here is what we have to source:
- The income must be regular and predictable
- There must be a reasonable likelihood that it will continue in the future
- It must be compatible with the hours of duty and other work conditions of the borrowers primary position
- How long the borrower has been employed
If all of these sources line up correctly with overtime and bonus, the lender may use this income, if it is not eligible for inclusion in effective income, but is verified for at least 12 months, to offset debts of 10 to 24 months duration and include an explanation.