General questions about VA loans that may arise
BEFORE you get one
Q: What is a
VA Guaranteed Home Loan?
A: 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 or a
later owner 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.
Q: What is pre-purchase counseling and
why is it helpful?
A: Pre-purchase counseling gives a person
information on (1) the process of buying a home,
(2) the key players in the home buying process,
and (3) debt management. The goal is to create a
more well informed homebuyer. While VA does not
require such counseling, we strongly recommend
it. There is usually no charge for the housing
counseling. An excellent online source of
information for first time homebuyers is
To locate a housing counseling office call (800)
569-4287. or visit HUDs
website. The Department of Housing and Urban
Development (HUD) maintains both the phone
Q: Does my entitlement guarantee that I
will get a home loan?
A: 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.
Q: How much is my entitlement?
A: 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 Freddie Mac
conforming loan limit for a single family home
may be available. This loan limit can change
yearly. The conforming loan limit for 2008 is
$417,000 ($625,500 for Hawaii, Alaska, Guam and
U.S. Virgin Islands). This means that qualified
veterans could get a no down payment purchase
loan for those amounts.
Q: How do I get a Certificate of
(automated certificate of eligibility): It may
be possible to obtain a Certificate of
Eligibility from your lender. Most lenders have
access to the ACE 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 ACE - 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
Q: How do I obtain a VA Home Loan?
A: Here are the steps:
a home and discuss the purchase with the
seller or selling agent. Sign a purchase
contract conditioned on approval of your VA
a lender, present them with your Certificate
of Eligibility and complete a loan
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.
lender will let you know the decision on the
loan. You should be approved if the
established value and your credit and income
(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
loan is sent to VA for guaranty. Your
Certificate of Eligibility is annotated to
reflect the use of entitlement and returned
are the benefits of a VA home loan?
A: There are many benefits of a VA Home
down payment (unless required by the lender
or the purchase price is more than the
reasonable value of the property).
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).
mortgage insurance premiums.
to prepay without penalty.
homes inspected by VA during construction, a
warranty from builder and assistance from VA
to obtain cooperation of builder.
assistance to veteran borrowers in default
due to temporary financial difficulty.
can VA not do?
A: 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
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.
guarantee that you are making a good
investment. VA cannot provide you with legal
Q: Is a
guaranteed loan a gift?
A: 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.
Q: Can I get a loan for a home outside of
the United States?
Unfortunately, the law only allows VA to
guarantee loans on property in the United
States, its territories, or possessions.
Q: Can I get a VA loan if I have had a
bankruptcy in the last few years?
fact you and/or your spouse have been
adjudicated bankrupt does not in itself
disqualify you for a VA home loan. The following
- If the
bankruptcy was discharged more than 2 years
ago, it may be disregarded
- If the
bankruptcy was discharged within the last 1
to 2 years, it is probably not possible to
determine that you and/or your spouse are a
satisfactory credit risk unless both
of the following requirements are met:
you and/or your spouse have
reestablished satisfactory credit,
the bankruptcy was caused by
circumstances beyond your and/or your
spouses control (such as unemployment,
medical bills, etc.)
- If the
bankruptcy was discharged within the past
12 months, it will not generally
be possible to determine that you and/or
your spouse are satisfactory credit risks.
Q: Why do
I have to pay a fee for a VA home loan? Since I
paid a fee for my first loan, why is there a
larger fee for my second loan?
A: The VA
funding fee is required by law. The fee is
intended to enable the veteran who obtains a VA
home loan to contribute toward the cost of this
benefit, and thereby reduce the cost to
taxpayers. The funding fee for second time users
who do not make a down payment is slightly
higher. The idea of a higher fee for second time
use is based on the fact that these veterans
have already had a chance to use the benefit
once, and also that prior users have had time to
accumulate equity or save money towards a down
payment. Second time users who make a down
payment of at least 5 percent pay a reduced
funding fee of 1.5 percent, the same as first
time users making the same down payment. For a
10 percent down payment, the fee drops to 1.25
percent. The effect of the funding fee on a
veteran's financial situation is minimized since
the fee may be financed in the loan. National
Guard and Reservist veterans pay a slightly
higher funding fee percentage. To determine the
exact funding fee percentage, please review the
funding fee table.
Q: I want to buy a house with a VA loan.
Do I need to occupy the property?
A: The law
requires that you certify that you intend to
occupy the property as your home. This
requirement is considered satisfied if you
actually intend to occupy the property as your
home and in fact so occupy it when the loan is
closed or within a reasonable time afterward.
Q: I am a single veteran stationed
overseas and want to buy a home in my home town.
My friends who are married can do this with
their spouses occupying the property in their
place, but VA says I can't do this with my
parents or other relatives occupying on my
behalf. Isn't this discrimination against single
A: The law
specifically provides that occupancy by the
veteran's spouse satisfies the personal
occupancy requirement. The law makes no
provision for occupancy by any other relatives
as a substitute for personal occupancy by the
Q: May a veteran join with a non veteran
who is not his or her spouse in obtaining a VA
but the guaranty is based only on the veteran's
portion of the loan. The guaranty cannot cover
the nonveteran's part of the loan. Consult
lenders to determine whether they would be
willing to accept applications for joint loans
of this type. Lenders that are willing to make
these types of loans will likely require a down
payment to cover risk on the unguaranteed,
nonveteran's portion of the loan. Unlike other
loans, the lender must submit joint loans to VA
for approval before they are made.
Both incomes can be used to qualify for the
loan. However, the veteran's income must be
sufficient to repay at least that portion of the
loan related to the veteran's interest in
(portion of) the property and the nonveteran's
income must be adequate to cover the rest.
Q: If a veteran dies before the loan is
paid off, will the VA guaranty pay off the
balance of the loan?
No. The surviving spouse or other co-borrower
must continue to make the payments. If there is
no CO-borrower, the loan becomes the obligation
of the veteran's estate. Mortgage life insurance
is available but must be purchased from private