VA Home Loans
Army Reserve: Drilling
Benefit Fact Sheet
VA helps Service members, Veterans, and eligible surviving Spouses become homeowners. As part of our mission to serve you, we provide a home loan guaranty benefit and other housing-related programs to help you buy, build, repair, retain, or adapt a home for your own personal occupancy.
VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.
For VA housing loan purposes, the term "Veteran" includes members of the Army National Guard, the Army Reserve, Regular Army, and certain categories of Spouses.
The VA Guaranteed Loan: VA guaranteed loans are made by private lenders to eligible Veterans for the purchase of a home that must be for their own personal occupancy. A Veteran must apply for a loan through a VA-approved lender. If the lender determines that the Veteran meets VA credit and income standards, the loan is approved and VA guarantees a portion of it to the lender. The guaranty protects the lender against loss up to the amount guaranteed and allows a Veteran to obtain favorable financing terms. A Veteran's basic entitlement is $36,000 but additional entitlement is available for certain loans over $144,000. VA does not have a maximum loan amount but lenders will generally only loan up to four 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. The maximum entitlement amount changes on an annual basis and is currently $104,250 for 2016. Therefore, if a Veteran qualifies, a loan up to $417,000 (or higher in certain areas of the following locations: in Alaska, California, Colorado, Connecticut, District of Columbia, Florida, Georgia, Guam, Hawaii, Idaho, Massachusetts, Maryland, Northern Mariana Islands, North Carolina, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Tennessee, Utah, Virginia, U.S. Virgin Islands, Washington, West Virginia and Wyoming) can be obtained without a down payment. NOTE: For 2015, the VA guaranty limit (or maximum entitlement amount) mirrors the Federal Housing Finance Agency limits.
Benefits of a VA Guaranteed Home Loan:
- Equal opportunity for all qualified Veterans to obtain a VA loan
- No down payment (unless required by the lender or the purchase price is more than the reasonable value of the property)
- No mortgage insurance
- One time VA funding fee that can be included in the loan
- Veterans receiving VA disability compensation are exempt from the VA funding fee
- VA limits certain closing costs a Veteran can pay
- Can be assumed by qualified persons
- Minimum property requirements to ensure the property is safe, sanitary, and sound
- VA staff dedicated to assisting Veterans who become delinquent on their loan
Types of VA Home Loans Available:
- Purchase/Cash-Out Refinance Loans: Purchase loans help you purchase a home at a competitive interest rate often without requiring a down payment or private mortgage insurance. Cash-out refinance loans allow you to take cash out of your home equity to take care of concerns like paying off debt, funding school, or making home improvements.
- Interest Rate Reduction Refinance Loan (IRRRL): Also called the Streamline Refinance Loan can help you obtain a lower interest rate by refinancing your existing VA loan.
- Native American Direct Loan (NADL) Program: Helps eligible Native American Veterans finance the purchase, construction, or improvement of homes on Federal Trust Land, or reduce the interest rate on a VA loan.
- Adapted Housing Grants: Helps Veterans with a permanent and total service-connected disability purchase or build an adapted home or to modify an existing home to account for their disability.
- Other Resources: Many states offer resources to Veterans, including property tax reductions to certain Veterans.
Obtaining a VA Guaranteed Loan:
Get a Certificate of Eligibility: The Certificate of Eligibility (COE) verifies to a lending institution that you meet the eligibility requirements for a VA loan. Learn more about the evidence you submit and how to apply for a COE on the VA Home Loans Eligibility page.
Find a Lender: Locate a lending institution that participates in the VA program. You may want to get "pre-qualified" at this point - that is, find out how big a loan you can afford. Lenders set their own interest rates, discount points, and closing points, so you may want to shop around.
Find a Home and Sign a Purchase Agreement: Work with a real estate professional and negotiate a purchase agreement. Make sure the purchase and sales agreement contains a "VA Option Clause." You may also want the purchase agreement to allow you to "escape" from the contract without penalty if you cannot get a VA loan.
Apply for your VA Loan: Work with the lender to complete a loan application and gather the needed documents, such as pay stubs and bank statements.
Loan Processing: The lender orders a VA appraisal and begins to process all the credit and income information.
(Note: VA's appraisal is not a home inspection or a guaranty of value. It is just an estimate of the market value on the date of the inspection. Although the appraiser does look for obviously needed repairs, VA does not guarantee the condition of the house. The appraiser, who is licensed, is not a VA employee. The lender cannot request a specific appraiser; assignments are made on a rotating basis.)
The lending institution reviews the appraisal and all the documentation of credit, income, and assets. The lender then decides whether the loan should be granted.
Closing: The lender chooses a title company, an attorney, or one of their own representatives to conduct the closing. This person will coordinate the date/time and the property is transferred. If you have any questions during the process that the lender cannot answer to your satisfaction, please contact VA at your Regional Loan Center.
Remaining Entitlement: Veterans who had a VA loan before may still have remaining entitlement to use for another VA loan. Most lenders require that a combination of the guaranty entitlement and any cash down payment must equal at least 25 percent of the reasonable value or sales price of the property, whichever is less. Thus, for example, $23,500 remaining entitlement would probably meet a lender's minimum guaranty requirement for a no-down payment loan to buy a property valued at and selling for $94,000. Veterans could also combine a down payment with the remaining entitlement for a larger loan amount.
Restoration of Entitlement: Veterans can have a previously-used entitlement restored to purchase another home with a VA Home Loan if the property purchased with the prior VA loan has been sold and the loan paid in full, or a qualified Veteran buyer agrees to assume the VA loan and substitute their entitlement for the same amount originally used by the Veteran seller. The entitlement may also be restored one time only if the Veteran has repaid the prior VA loan in full, but has not disposed of the property purchased with that loan. Remaining entitlement and restoration of entitlement can be requested through the VA Eligibility Center by completing VA Form 26-1880.
For more information, please visit the VA Home Loans website maintained by the Department of Veterans Affairs: http://www.benefits.va.gov/homeloans/
Fact Sheet on VA Guaranteed Loans:
Document Review Date: 29 April 2016