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Family and Housing Home Loan Guaranty and Mortgage Protection Abstract The Department of Veterans Affairs (VA) Home Loan Guaranty Program offers loans from private lenders such as banks, savings and loan associations, or mortgage companies to qualified persons. The Basics A VA guaranteed loan is a loan offered by private lenders (such as banks, savings & loans, or mortgage companies) to certain eligible people. If you want to purchase a home, condominium, or manufactured home, the VA can guarantee up to $417,000<parameter: new: HLGP-max-guarantee > of the total loan, which is much more than you can get with most conventional home loans. If you are considering refinancing an existing loan, VA offers you two options. You can either refinance to reduce your current interest rate or you can take equity <glossary> out (cash-out). The "cash-out" option is limited to $144,000<parameter: new: HLGP-cash-out-max >. The VA's guaranty on the loan protects the lender against loss if the payments are not made, and is intended to encourage lenders to offer you loans with more favorable terms. The amount of guaranty on the loan depends on your loan amount and whether you have previously used some entitlement. With the current maximum guaranty, if you have not previously used the benefit, you may be able to obtain a VA loan of up to $417,000<parameter: new: HLGP-max-guarantee > ($625,500<parameter: new: HLGP-max-guarantee-for-Hawaii-Alaska-Guam-Virgin-Islands > for loans in Hawaii, Alaska, Guam and U.S. Virgin Islands), depending on your income level and the appraised value of the property. Eligibility You are eligible for VA financing if your service falls within any of the following categories: Wartime Service • WWII: 9/16/1940 to 7/25/1947 • Korea: 6/27/1950 to 1/31/1955 • Vietnam: 8/5/1964 to 5/7/1975 You must have served at least 90 days of continuous active duty and been discharged under other than dishonorable conditions. If you served less than 90 days, you may be eligible if discharged for a service- connected disability. Peacetime Service • 7/26/1947 to 6/26/1950 • 2/1/1955 to 8/4/1964 • 5/8/1975 to 9/7/1980 (Enlisted) • 5/8/1975 to 10/16/1981 (Officer) You must have served at least 181 days of continuous active duty and been discharged under other than dishonorable conditions. If you served less than 181 days, you may be eligible if discharged for a service-connected disability. Service after 9/7/1980 (enlisted) or 10/16/1981 (officer) If you were separated from service which began after these dates, you must have: • Completed 24 months of continuous active duty or the full period (at least 181 days) for which you were ordered or called to active duty and been discharged under conditions other than dishonorable • Completed at least 181 days of active duty and been discharged under the specific authority of 10 USC 1173 (Hardship), or 10 USC 1171 (Early Out), or have been determined to have a compensable service-connected disability • Been discharged with less than 181 days of service for a service-connected disability. You may also be eligible if you were released from active duty due to an involuntary reduction in force, certain medical conditions, or, in some instances, for the convenience of the Government Gulf War - Service during period 8/2/1990 to date yet to be determined If you served on active duty during the Gulf War, you must have: • Completed 24 months of continuous active duty or the full period (at least 90 days) for which you were called or ordered to active duty, and been discharged under conditions other than dishonorable • Completed at least 90 days of active duty and been discharged under the specific authority of 10 USC 1173 (Hardship), or 10 USC 1173 (Early Out), or have been determined to have a compensable service-connected disability • Been discharged with less than 90 days of service for a service-connected disability. You may also be eligible if you were released from active duty due to an involuntary reduction in force, certain medical conditions, or, in some instances, for the convenience of the Government Active Duty Service Personnel If you are now on regular duty (not active duty for training), you are eligible after having served 181 days (90 days during the Gulf War) unless discharged or separated from a previous qualifying period of active duty service. Selected Reserves or National Guard If you are not otherwise eligible and you have completed a total of 6 years in the Selected Reserves or National Guard (and you were a member of an active unit, attended required weekend drills and 2-week active duty for training) and: • Were discharged with an honorable discharge • Were placed on the retired list • Were transferred to the Standby Reserve or an element of the Ready Reserve other than the Selected Reserve after service characterized as honorable service • Continue to serve in the Selected Reserves • You have less than 6 years, but were discharged for a service-connected disability Unremarried Surviving Spouses/Spouses of POW or MIA Serviceperson: • If you’re an unremarried spouse of a veteran who died while in service or from a service- connected disability • If you’re a spouse of a serviceperson missing in action or a prisoner of war. Note: Also, a surviving spouse who remarries on or after attaining age 57 and on or after December 16, 2003, may be eligible for the home loan benefit. Eligibility may also be established for: • Certain United States citizens who served in the armed forces of a government allied with the United States in WW II • Individuals with service as members in certain organizations, to include Public Health Service officers, cadets at the United States Military, Air Force, or Coast Guard Academy, midshipmen at the United States Naval Academy, officers of the National Oceanic & Atmospheric Administration, merchant seaman with WW II service, and others For more information on service-connected disability read VB101’s articles on VA Disability Compensation <link to: VB101: VA Disability Compensation: Basics> and VA Additional Monthly Compensation <link to: VB101: VA Additional Monthly Compensation: Basics>. Benefits and Services VA Loans Advantages: • No down payment required, thus reducing the origination cost of the loan • The loan maximum may be up to 100 percent of the VA established reasonable value of the property • You have flexibility in negotiating interest rates with the lender • There is no monthly mortgage insurance premium (private mortgage insurance <glossary>, or PMI) • There is a limit on the buyer's closing costs • The buyer receives an appraisal <glossary> that shows the property value • 30-year loans have a choice of repayment plans to include: o Traditional fixed-payments: constant principal and interest; increases or decreases may be expected in property taxes and homeowner's insurance coverage o Graduated-payment mortgage (GPM): low initial payments that gradually rise to a level payment starting in the sixth year o Growing equity mortgage (GEM): have gradually increasing payments with all of the increases applied to the principal, resulting in an early payoff of the loan • For most new home loans, construction is inspected at appropriate stages to ensure compliance with the approved plans, and a one-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 • The mortgage is assumable, subject to VA approval of the assumer's credit • No pre-payment penalty, and • The VA performs personal loan servicing and offers financial counseling to help veterans avoid losing their homes during temporary financial difficulties. Eligible Loan Purposes You may use Department of Veterans Affairs (VA) guaranteed loans: • To buy a home • To buy a townhouse or condominium unit in a project that has been approved by VA • To build a home • To repair, alter, or improve a home • To simultaneously purchase and improve a home • To improve a home through installment of a solar heating and/or cooling system or other energy efficient improvements • To buy a manufactured (mobile) home or lot • To buy and improve a lot on which to place a manufactured home which you already own and occupy • To refinance a manufactured home loan in order to acquire a lot Requirements for a VA Loan Approval To get a VA loan the law requires that: • You must be an eligible veteran who has available home loan entitlement (except in the case of an interest rate reduction refinancing loan) • The loan must be for an eligible purpose. The purchase price should not exceed the appraised value. Otherwise, you will have to pay the difference from your own resources • You must occupy or intend to occupy the property as your home within a reasonable period of time after closing the loan • You must have enough income to meet the new mortgage payments on the loan, cover the costs of owning a home, take care of other obligations and expenses, and still have enough income left over for family support, and • You must have a good credit record. Repayment Plans VA will guarantee loans to purchase homes made with the following repayment plans: • Traditional Fixed-Payment Mortgage: This type of mortgage loan calls for equal monthly payments for the life or term of the loan. Each monthly payment reduces a certain portion of the principal owed on the loan and pays interest accrued to date. • GPM (Graduated Payment Mortgage): This repayment plan provides for smaller-than-normal monthly payments for the first few years (usually 5 years), which gradually increase each year, and then level off after the end of the "graduation period" to larger-than-normal payments for the remaining term of the loan. The reduction in the monthly payment in the early years of the loan is accomplished by delaying a portion of the interest due on the loan each month and by adding that interest to the principal balance. • Buydowns: The builder of a new home or seller of an existing home may "buy down" the veteran's mortgage payments by making a large lump-sum payment up front at closing that will be used to supplement the monthly payments for a certain period, usually 1 to 3 years. • GEM (Growing Equity Mortgage): This repayment plan provides for a gradual annual increase in the monthly payments with all of the increase applied to the principal balance. The annual increases in the monthly payment may be fixed (for example, 3 percent per year) or tied to an appropriate index. The increases to the monthly payment result in an early payoff of the loan in about 11 to 16 years for a typical 30 year mortgage. • ARM (Adjustable Rate Mortgages): ARM loans are typically made at an initial interest rate lower than market rate; however the interest rate can be adjusted – up or down – during the life of the loan. A one year ARM allows for annual adjustments of no more than one percent and a lifetime cap of five percent. Hybrid ARM loans allow for an initial fixed rate for a period of at least 3 years, followed by annual adjustments. Depending on the length of the fixed rate period, the initial adjustment can be up to 2 percent and the lifetime cap is either 5 percent or 6 percent. Down Payment Requirements Traditional Fixed-Payment Mortgage, Buydown Loans, and Growing Equity Mortgage The Department of Veterans Affairs (VA) does not require a down payment if the purchase price or cost is not more than the reasonable value of the property as determined by VA, but the lender may require one. If the purchase price or cost is more than the reasonable value, the difference must be paid in cash from your own resources. Graduated Payment Mortgage The maximum loan amount may not be for more than the reasonable value of the property or the purchase price, whichever is less. Because the loan balance will be increasing during the first years of the loan, a down payment is required to keep the loan balance from going over the reasonable value or the purchase price. Interest Rates The interest rate on Department of Veterans Affairs (VA) loans can be negotiated based on prevailing rates in the mortgage market. Once a loan is made, the interest rate set in the note will stay the same for the life of the loan. However, if interest rates go down, and you still own and occupy (or previously occupied) the property securing a VA loan, you may apply for a new VA loan to refinance the previous loan at a lower interest rate without using any additional entitlement. Closing Costs Department of Veterans Affairs (VA) regulates those closing costs you may be charged in connection with closing a VA loan. No commission or brokerage fees may be charged to you for obtaining a VA loan. However, you may pay reasonable closing costs to the lender in connection with a VA guaranteed loan. Although some additional costs are unique to certain localities, the closing costs generally include VA appraisal, credit report, survey, title evidence, recording fees, a 1% loan origination fee, and discount points <glossary>. The closing costs and origination charge may not be included in the loan, except in VA refinancing loans. In addition to negotiating the interest rate with the lender, you may negotiate the payment of discount points and other closing costs with the seller. Often, sellers will consider paying some or all of the discount points required by the lender in order to complete the sale. This can have a big impact on the amount of cash you must pay out of pocket in order to complete the purchase. If the seller will not consider paying points, you may be able to negotiate an interest rate with the lender which is sufficient to avoid the need to include any discount points in the transaction. Funding Fee You must also pay a Department of Veterans Affairs (VA) funding fee at the time of your loan closing. The fee may be included in the loan and paid from loan proceeds. The fee is not required if you are in receipt of service-connected compensation, or would be but are receiving military retired pay instead. It is also not required from surviving spouses of veterans who died in service or from service-connected causes. Restoration of Entitlement You can have previously-used entitlement "restored" to purchase another home with a VA loan if: • The property purchased with the prior Department of Veterans Affairs (VA) loan has been sold and the loan paid in full • A qualified veteran transferee (buyer) agrees to assume the VA loan and substitute his or her entitlement for the same amount of entitlement originally used by you, the veteran seller. The entitlement may also be restored one time only if you have repaid the prior VA loan in full, but have not disposed of the property purchased with the prior VA loan. Remaining entitlement and restoration of entitlement can be requested through the VA Eligibility Center by completing VA Form 26-1880, found here<link to: http://www.vba.va.gov/pubs/forms/26-1880%283- 11%29.pdf > VA Home Loan Safeguards • The Department of Veterans Affairs (VA) may suspend from the loan program lenders who take unfair advantage of you, the borrower, or decline to sell a new home or make a loan to you because of race, color, religion, sex, disability, family status or national origin • The builder of a new home is required to give you a one year warranty that the home has been constructed to VA approved plans and specifications. A similar warranty must be given for new manufactured homes • In cases of new construction completed under VA or Housing and Urban Development (HUD) inspection, the VA may pay or otherwise compensate you for correction of structural defects seriously affecting livability if assistance is requested within four years of a home loan guaranty • You may only be charged the fees and other charges prescribed by VA as allowable • You can prepay without penalty the entire loan or any part not less than the amount of one installment or $100<parameter: new: HLGP-minimum-prepayment-amount > • The VA encourages holders to extend forbearance if you become temporarily unable to meet the terms of the loan Getting Benefits and Services Certificate of Eligibility In order to obtain a Department of Veterans Affairs (VA) home loan, you must first obtain your Certificate of Eligibility. This certificate is issued only through the Veterans Administration, and is the first step towards applying for your loan. Veterans, active duty, guard or reserve, and military spouses potentially qualify for this certificate. Keep in mind that the Certificate of Eligibility, while necessary, only allows you to apply for a home loan; it does not guarantee a loan approval. ACE (automated certificate of eligibility): In some cases you can obtain the Certificate of Eligibility from a lender. Most lenders have access to the ACE system. This internet-based application can establish your eligibility and issue an online Certificate of Eligibility in seconds. Not all cases can be processed through ACE – only those for which VA has sufficient data in their records. However, you are encouraged to ask your lender about this method of obtaining a certificate. If the certificate cannot be issued by ACE, you can request it from VA by completing VA Form 26-1880, found here<link to: http://www.vba.va.gov/pubs/forms/26-1880%283-11%29.pdf >, “Request for A Certificate of Eligibility.” The form should be submitted along with either the originals or legible 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. You may use Standard Form 180, found here, <link to: http://www.archives.gov/research/order/standard-form-180.pdf > to obtain these documents. If you were separated after January 1, 1950, you must submit a DD Form 214, Certificate of Release or Discharge from Active Duty. If you are now on active duty and have not been previously discharged from active duty service, you must submit a statement of service which includes the name of the issuing authority (base or command), and is signed by or at the direction of an appropriate official. The statement must include your date of entry on active duty and the duration of any time lost. Since there is no uniform document similar to the DD214 for proof of service in the Selected Reserve, a number of different forms may be accepted as documentation of your service in the Selected Reserve. If you served in the Army or Air National Guard and were discharged after at least 6 years of such service, NGB Form 22 may be sufficient. If you served in the Reserves of the Army, Navy, Air Force, Marine Corps, or Coast Guard, you may need to rely on any of a variety of forms that document at least 6 years of honorable service. Often, it will be necessary to submit a combination of documents such as an Honorable Discharge certificate together with a retirement points statement. It is your responsibility to obtain and submit documentation of 6 years of honorable service. The Request for Certificate of Eligibility, VA Form 26-1880, found here<link to: http://www.vba.va.gov/pubs/forms/26-1880%283-11%29.pdf >, should be mailed to the Winston-Salem Eligibility Center, P.O. Box 20729, Winston-Salem, NC 27120. The Eligibility Center also has a toll free number (888-244-6711). VA Appraisal Because the loan amount may not exceed the Department of Veterans Affairs’ (VA) estimate of the value of the property, the first step in getting a VA loan is usually to request an appraisal. Although anyone (buyer, seller, real estate personnel or lender) can request a VA appraisal, usually this is done by the lender. It is important to recognize that while the VA appraisal estimates the value of the property, it is not an inspection and does not guarantee that the house is free of defects. You are encouraged to carefully inspect the property or to hire a reputable inspection firm to help in this area. VA guarantees the loan, not the condition of the property. Application The application process for Department of Veterans Affairs (VA) financing is no different from any other type of loan. In fact, the VA application form is the same as that used for Housing and Urban Development/Federal Housing Administration (HUD/FHA) and conventional loans. The mortgage lender verifies your income and assets and obtains a credit report to see that other obligations are being paid on time. If all is well and the appraised value of the property is enough to cover the loan needed, the lender, in most instances, can then close the loan under VA's automatic procedure. Occupancy Requirements and Military Retirement VA rules for occupancy require you to move into the property within 60 days of closing the deal on the home. Some veterans close to retirement may want to purchase a home, but can’t move in within 60 days because their military retirement date is several months away. In these cases, VA agrees to examine special needs requests on a case-by-case basis. If you have a spouse that can move into the property within 60 days, there is no need for additional action on the loan beyond what’s required to establish your spouse’s occupancy and get VA acknowledgment and/or approval for the arrangement. If you do not have a spouse, the VA allows you to submit your situation in writing for a possible exception to the 60 day rule. You must explain the delay in moving in after the 60 day mark and request an exception. The VA may accept a later move in date, but generally nothing longer than 12 months past the closing date of the loan is accepted. The VA is fairly strict about this, requiring you to submit proof of a retirement date and to submit, in writing, intent to take possession of the home in a specific date range. The VA makes exceptions in cases where there are specific dates involved – the retirement date cannot be “soon” or “within a few years.” In addition to the required letter of explanation, the VA may also require you to show you can afford to maintain the costs of a current residence plus the VA mortgage payments in the time period between the closing of the loan and moving into the new home. Home Loan Guaranty and Mortgage Protection & Work There are no work incentives or obstacles associated with the VA Home Loan Guaranty and Mortgage Protection benefit. Your income can affect the amount of the loan for which you can be approved. FAQs What is a VA Guaranteed Home Loan? Department of Veterans Affairs guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies, to eligible persons for the purchase of a home which must be for your own 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 do I obtain a VA Home Loan? Here are the steps: • Select a home and discuss the purchase with the seller or selling 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 your 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. Can I get a loan for a home outside of the United States? No. The law only allows VA to guarantee loans on property in the United States and its territories and possessions. Can I get a VA loan if I have had a bankruptcy in the last few years? Yes. The fact you and/or your spouse have been adjudicated bankrupt does not in itself disqualify you for a VA home loan. The following rules apply: • 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, and • The bankruptcy was caused by circumstances beyond your or your spouse’s control (such as unemployment or medical bills). I want to buy a house with a VA loan. Do I need to occupy the property? Yes. The law requires that you certify that you intend to occupy the property as your home. This requirement is considered satisfied if you occupy it when the loan is closed or within a reasonable time afterward. I am a single veteran stationed overseas and want to buy a home in my home town in the United States. My friends who are married can do this by having their spouses occupying the property in their place, but VA says I can't have my parents or other relatives occupy on my behalf. Isn't this discrimination against single veterans? Yes. 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 veteran or the veteran’s spouse. If I die before the loan is paid off, will the VA guaranty pay off the balance of the loan? No. Your 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 insurance sources. How can I obtain proof of military service? Standard Form 180, found here,<link to: http://www.archives.gov/research/order/standard-form- 180.pdf >, 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, found here, <link to: http://www.archives.gov/research/order/standard-form-180.pdf > is completed and mailed to the appropriate custodian of military service records. Instructions are provided on 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, found here, <link to: http://www.vba.va.gov/pubs/forms/26- 1880%283-11%29.pdf > to the Winston-Salem Eligibility Center. 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 the Winston-Salem Eligibility Center. In addition, a surviving spouse who obtained a VA home loan with the veteran prior to their death (regardless of the cause of death), may obtain a VA guaranteed interest rate reduction refinance loan. Are the children of a living or deceased veteran eligible for the home loan benefit? No. How much is the guaranty? VA will guarantee up to 50 percent of a home loan up to $45,000<parameter: new: HLGP-loan-limit-for- up-to-50%-guarantee >. For loans between $45,000<parameter: new: HLGP-loan-limit-minimum-for- minimum-guaranty-of-22500 > and $144,000<parameter: new: HLGP-loan-limit-maximum-for- minimum-guaranty-of-22500 >, the minimum guaranty amount is $22,500<parameter: new: HLGP-min- guaranty-amount-for-loans-45000-to-144000 >, with a maximum guaranty of up to 40 percent of the loan, up to $36,000<parameter: new: HLGP-max-guaranty-amount-for-loans-45000-to-144000 >, subject to the amount of entitlement a veteran has available. For loans of more than $144,000<parameter: new: HLGP-max-for-guaranty-of-lesser-of-25%-or-104250 > made for the purchase or construction of a home or to purchase a residential unit in a condominium or to refinance an existing VA guaranteed loan for interest rate reduction, the maximum guaranty is the lesser of 25% or $104,250,<parameter: new: HLGP-max-guaranty-for-loans-of-more-than-144000 > which is 25% of the Freddie Mac conforming loan limit for a single family residence. This figure will change yearly. Is $36,000 the biggest loan a veteran can get? No. You may generally borrow up to the reasonable value of the property or the purchase price, whichever is less, plus the funding fee, if required. For certain refinancing loans, the maximum loan is limited to 90 percent of the value of the property, plus the funding fee, if required. To determine the reasonable value, VA requires an appraisal of the property. What is the maximum VA loan? There is no maximum VA loan, except that the loan cannot exceed the lesser of the appraised value or purchase price, plus VA funding fee and energy efficient improvements, if applicable. However, lenders usually won’t make a no-down payment loan larger than $417,000<parameter: new: HLGP-max- guarantee > ($625,500<parameter: new: HLGP-max-guarantee-for-Hawaii-Alaska-Guam-Virgin-Islands > in Alaska, Hawaii, Guam, and the U.S. Virgin Islands) due to secondary market limitations. Does active duty for training in the Guard and Reserves qualify a person for home loan benefits? No. Active duty for training in the Guard and Reserves does not qualify a person for home loan benefits, unless the person completes a total of 6 years in the Guard or Reserves and serves under title 10, U.S.C. Does VA home loan entitlement provide cash to the veteran? No. The amount of entitlement refers only to the amount VA will guarantee the lender against loss. Can a veteran or active duty servicemember who is eligible for a Specially Adapted Housing (SAH) grant apply for a VA home loan from a private lender to cover the difference between the total cost of the house and the SAH grant? Yes. If you are eligible for a Specially Adapted Housing (SAH) grant you can apply for a VA home loan from a private lender to cover the difference between the total cost of the house and the SAH grant. SAH program eligibility requirements and points of contact information are available here<link to: http://www.benefits.va.gov/homeloans/sah.asp >. If private financing is not available, can VA make a direct loan to the veteran or active duty servicemember to cover the difference between the total cost of the house and a Specially Adapted Housing (SAH) grant? Yes. This can be done if the veteran or active duty servicemember has GI home loan entitlement and qualifies from a credit standpoint. The maximum direct loan is $33,000<parameter: new: HLGP-max- direct-loan >. Can I get a VA loan to pay off the mortgage or other liens of record on my home? Yes. The following refinancing loans are available under the VA-guaranteed home loan program: • To pay off the mortgage and/or other liens of record on the home. In most cases, the loan may not exceed 90 percent of the reasonable value of the property as determined by an appraisal, plus the funding fee, if required. The loan may include funds for any purpose which is acceptable to the lender, plus closing costs, including a reasonable number of discount points. You must have available home loan entitlement. An existing loan on a manufactured home (except as noted below) may not be refinanced with a VA-guaranteed loan. • To refinance an existing VA loan to obtain a lower interest rate. Use of additional loan entitlement is not required. The loan amount is limited to the balance of the old loan plus the closing costs, discount points, funding fee, and up to $6,000<parameter: new: HLGP-max- energy-efficient-improvements > in energy efficient improvements. An existing VA loan on a manufactured home may be refinanced to obtain a lower interest rate. Can I get a VA loan to buy or construct a residential property containing more than one family unit? Yes. The total number of separate units cannot be more than four if one veteran is buying. If more than one veteran is buying, then one additional family unit may be added to the basic four for each veteran participating. Thus, one veteran could buy four units; two veterans, six units; three veterans, seven units, etc. In addition, if the veteran must depend on rental income from the property to qualify for the loan, the veteran must (a) show that he or she has the background or qualifications to be successful as a landlord, and (b) have enough cash reserves to make the loan payments for at least 6 months without help from the rental income. Can a veteran get a VA loan to purchase a cooperatively-owned apartment? Yes. VA is authorized to approve loans made to purchase a unit in a cooperative (co-op). However, only a limited number of lenders have shown an interest in this type of loan. Can I obtain a loan from a private lender in one State for the purchase of property in another State? Yes. However, many lenders limit their lending operations to certain areas. May a lender require security from me in addition to the property being purchased? Yes. How are VA loans processed? There are two ways a lender may process VA home loans: "prior approval" or "automatic." When the loan is processed on a prior approval basis, the lender takes your application, requests that VA appraise the property, and verifies your income and credit record. All this information is put together in a loan package and sent to VA for review. If VA approves the loan, a commitment by VA to guarantee the loan is sent to the lender. The lender then closes the loan and sends a report of the closing to VA. If the loan complies with VA requirements, VA issues the lender a certificate of guaranty. In automatic processing, the lender still orders an appraisal from VA, but has the authority to make the credit decision on the loan without VA's approval. The biggest difference between prior approval and automatic processing is the time saved by avoiding the need to await VA's approval before loan closing. All lenders do not have the authority to process loans on the automatic basis. Banks, savings and loan associations, and certain other lenders, such as mortgage companies which are approved by VA, have the privilege of processing VA-guaranteed loans using the automatic procedure. Lenders approved to participate in VA's Lender Appraisal Processing Program (LAPP) are generally able to expedite the processing of VA appraisals. Does having a VA loan limit my right or ability to sell the property? No. You may sell the property to a veteran or non-veteran at any time. However, if the loan was approved on or after March 1, 1988, and it will be assumed, the qualifications of the assumer must be reviewed and approved by the lender or VA. When I sell the property to someone who will assume the existing VA loan, am I released automatically from personal liability for repayment of the loan? No. If the loan was approved on or after March 1, 1988, the lender or VA must be notified and requested to approve the assumer and grant you release from liability. If the loan was approved prior to March 1, 1988, the loan may be assumed without approval from VA or the lender. However, you are strongly urged to request a release of liability from VA. Pitfalls Making major purchases Once you have submitted your loan application, you should not alter your financial status, especially by taking on new debt, as this may negatively affect your possible loan approval. Not inspecting the property The VA does not guarantee the condition of the property or associated systems such as wiring or plumbing. You should hire a professional inspector to ensure the condition of the property prior to purchase. Next Steps You should work with a professional real estate agent to assist you in making your home purchase. Getting your documents is order prior to locating your desired home is a good idea. You can use Standard Form 180, found here,<link to: http://www.archives.gov/research/order/standard-form- 180.pdf >, Request Pertaining to Military Records, to obtain your military service records, and VA Form 26-1880, found here,<link to: http://www.vba.va.gov/pubs/forms/26-1880%283-11%29.pdf >, The Request for Certificate of Eligibility, which should be mailed to the Winston-Salem Eligibility Center, P.O. Box 20729, Winston-Salem, NC 27120. The Eligibility Center also has a toll free number (888-244-6711). Also on Veterans Benefits 101 VA Disability Compensation VA Additional Monthly Compensation Veterans Mortgage Life Insurance Specially Adapted Housing and Special Housing Adaptation Grants Home Improvements and Structural Alterations Grants HUD-VASH Certificates Sources http://www.benefits.va.gov/homeloans/veteran.asp www.military.com http://www.benefits.gov http://www.valoans.com Glossary Terms Appraisal: An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Discount points: In the mortgage industry, this term is usually used in reference to government loans, meaning FHA and VA loans. Discount points refer to any "points" paid in addition to the 1% loan origination fee. A "point" is one percent of the loan amount. Equity: A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens. Mortgage Insurance (MI): Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. It is often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value (LTV) higher than eighty percent. Mortgages above 80% LTV that call themselves "No MI" are usually made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, Federal Housing Administration (FHA) loans and certain first- time homebuyer programs require mortgage insurance regardless of the LTV.
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