VA Loan Guidelines
Lawrence Vecchio 185384 800-206-4360
Licensed by NJ Department of Banking and Insurance
The VA Loan became known in 1944 through the original Servicemen's Readjustment Act also known as the GI Bill of Rights. The GI Bill was signed into law by President Franklin D. Roosevelt and provided veterans with a federally guaranteed home with no down payment. This feature was designed to provide housing and assistance for veterans and their families, and the dream of home ownership became a reality for millions of veterans. The GI Bill contributed more than any other program in history to the welfare of veterans and their families, and to the growth of the nation's economy.
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 fails 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.
More than 29 million veterans and service personnel are eligible for VA financing.
Even though many veterans have already used their loan benefits, it may be possible for them to buy homes again with
VA financing using remaining or restored loan entitlement.
Before arranging for a new mortgage to finance a home purchase, veterans should consider some of the advantages of
VA home loans:
1. Most important consideration, no downpayment is required in most cases.
2. Loan maximum may be up to 100 percent of the VA-established reasonable value of the property. Due to secondary
market requirements, however, loans generally may not exceed $203,000.
3. Flexibility of negotiating interest rates with the lender.
4. No monthly mortgage insurance premium to pay.
5. Limitation on buyer's closing costs.
6. An appraisal which informs the buyer of property value.
7. Thirty year loans with a choice of repayment plans:
a. Traditional fixed payment (constant principal and interest; increases or decreases may be expected in property taxes
and homeowner's insurance coverage);
b. Graduated Payment Mortgage--GPM (low initial payments which gradually rise to a level payment starting in the sixth
c. In some areas, Growing Equity Mortgages-GEMs (gradually increasing payments with all of the increase applied to
principal, resulting in an early payoff of the loan).
8. For most loans for new houses, construction is inspected at appropriate stages to ensure compliance with the
approved plans, and a 1-year warranty is required from the builder that the house is built in conformity with the
approved plans and specifications. In those cases where the builder provides an acceptable 10-year warranty plan, only
a final inspection may be required.
9. An assumable mortgage, subject to VA approval of the assumer's credit.
10. Right to prepay loan without penalty.
11. VA performs personal loan servicing and offers financial counseling to help veterans avoid losing their homes during
temporary financial difficulties.
:: 5 Steps to a VA Loan
1. Apply for a Certificate of Eligibility.
A veteran who doesn't have a certificate can obtain one easily by completing VA Form 26-1880, Request for a
Certificate of Eligibility for VA Home Loan Benefitsand submitting it to one of the Eligibility Centers with copies of your
most recent discharge or separation papers covering active military duty since September 16, 1940, which show active
duty dates and type of discharge.
2. Decide on a home the buyer wants to buy and sign a purchase agreement
3. Order an appraisal from VA. (Usually this is done by the lender.)
Most VA regional offices offer a "speed-up" telephone appraisal system. Call the local VA office for details.
4. Apply to a mortgage lender for the loan.
While the appraisal is being done, the lender (mortgage company, savings and loan, bank, etc.) can be gathering credit
and income information. If the lender is authorized by VA to do automatic processing, upon receipt of the VA or LAPP
appraised value determination, the loan can be approved and closed without waiting for VA's review of the credit
application. For loans that must first be approved by VA, the lender will send the application to the local VA office, which
will notify the lender of its decision.
5. Close the loan and move in.
:: VA Loan Uses
The VA Loan can be utilized several different ways, which one fits your needs?
1. To buy a home, including townhouse or condominium unit in a VA-approved project.
2. To build a home.
3. To simultaneously purchase and improve a home.
4. To improve a home by installing energy-related features such as solar or heating/cooling systems, water heaters,
insulation, weather-stripping/ caulking, storm windows/doors or other energy efficient improvements approved by the
lender and VA. These features may be added with the purchase of an existing dwelling or by refinancing a home owned
and occupied by the veteran. A loan can be increased up to $3,000 based on documented costs or up to $6,000 if the
increase in the mortgage payment is offset by the expected reduction in utility costs. A refinancing loan may not exceed
90 percent of the appraised value plus the costs of the improvements. Check with a lender or VA for details.
5. To refinance an existing home loan up to 90 percent of the VA-established reasonable value or to refinance an
existing VA loan to reduce the interest rate.
6. To buy a manufactured home and/or lot.
:: VA Loan Eligibility
Veterans who served on active duty and were discharged under conditions other than dishonorable, during World War II
and later periods are eligible for VA loan benefits. World War II (September 16, 1940 to July 25, 1947), Korean conflict
(June 27, 1950 to January 31, 1955), and Vietnam era (August 5, 1964 to May 7, 1975) veterans must have at least 90
days' service. Veterans with service only during peacetime periods and active duty military personnel must have had
more than 180 days' active service. Veterans of enlisted service which began after September 7, 1980, or officers with
service beginning after October 16, 1981, must in most cases have served at least 2 years.
Basically, reservists and National Guard members who were activated on or after August 2, 1990, served at least 90
days and were discharged honorably are eligible. VA regional office personnel may assist with eligibility questions.
Members of the Selected Reserve, including National Guard, who are not otherwise eligible and who have completed 6
years of service and have been honorably discharged or have completed 6 years of service and are still serving may be
eligible. The expanded eligibility for Reserves and National Guard individuals will expire September 30, 2003. Contact
the local VA office to find out what is needed to establish eligibility. Reservists will pay a slightly higher funding fee than
:: VA Loan Q&A
How do I apply for a VA guaranteed loan?
You can apply for a VA loan at any mortgage company that participates in the VA home loan program. At some point,
you will need to get a Certificate of Eligibility from VA to prove to the mortgage company that you are eligible for a VA
How do I get a Certificate of Eligibility?
To get a Certificate of Eligibility, you need to submit form 26-1880, Request for Determination of Eligibility and Available
Loan Guaranty Entitlement. A copy of the form can be obtained by calling 800-827-1000. Send it to any VA Regional
Office. You must include a copy of your DD214 with the form 26-1880. If you are on active duty, you must submit a
statement of service signed by, or by direction of, the adjutant, personnel officer, or commander of your unit or higher
headquarters showing date of entry on your current active duty period and the duration of any time lost.
I have already received one VA loan. Can I get another one?
Yes, depending on the circumstances. If you have paid off your prior VA loan and disposed of the property, you can
have your entitlement restored for additional use. To obtain restoration of entitlement, you must send VA a completed
VA Form 26-1880, along with evidence that the property has been disposed of and the loan repaid in full. This evidence
can be in the form of a pay-off statement from the former mortgage company, or a copy of the HUD-1 settlement
statement completed in connection with the sale of the property. The application can be presented to any VA Regional
Office. A veteran can also obtain restoration of entitlement, on a one-time basis, if the prior VA loan has been paid in full
but the property has not been sold.
I have sold the property I obtained with my prior VA loan on an assumption. Why can't I get my entitlement
restored to purchase a new home?
In this case the your entitlement can be restored only if the assumer is also an eligible veteran who is willing to substitute
his or her entitlement for that of your original entitlement. Otherwise, you cannot have entitlement 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 mortgage
company. VA said it wasn't my fault and waived the debt. Now I need a new VA loan but am told that I am not
eligible. Why not? or My prior loan was foreclosed on, or I gave a Deed in Lieu of Foreclosure, or VA paid a
compromise claim. I was released from liability on the loan and/or the debt was waived. Can I get another VA
Although the your debt was waived by VA, the Government has still suffered a loss on the loan. The law does not permit
the your entitlement to be restored until the loss has been repaid in full.
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