In 1944, VA loans were introduced as part of the GI Bill, but they’ve become increasingly popular in recent years. Through the first half of 2018, 8% of home purchases were made with a VA loan.
This loan is one of the two nonconventional (or government) loans available today. Like a conventional loan, VA loans are issued by private lenders like banks or mortgage companies, but they’re insured by the government. VA loans are specifically guaranteed by the Department of Veterans Affairs. That means the VA agrees to repay a portion of the loan to the bank if you don’t make your payments (default) or if you face losing your home (foreclosure).
You may be eligible for a VA Home Loan if you meet one or more of the following conditions:
A VA approved lender can use an online program called ACE – the Automated Certificate of Eligibility – to get you started in the VA loan process. Unfortunately, the automated system won’t work for everyone. Some people don’t have enough information in the ACE database, and are required to fill out a VA Form 22-1880, commonly referred to as a Request for Certificate of Eligibility. If this applies to you, simply fill out the form and mail it to your regional Eligibility Center along with supporting paperwork including a copy of the DD-214 discharge paperwork.
Don’t send originals of the DD214, a photocopy will do. The certificate of eligibility process can be tricky for veterans who were separated from the military with a discharge other than honorable. In this case the VA must investigate the discharge to insure it was not classified as dishonorable. People who fall into this category should seek help from their local VA office, especially if you need to file an appeal to the results of your request of eligibility.
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The VA loan can be used to buy a home (including townhouse or condominium unit in a VA-approved project), to build a home, to simultaneously purchase and improve a home, to improve a home by installing energy-related features, or to buy a manufactured home and/or lot.
On manufactured homes, there must be land included with the home and the home must be at least 24 feet wide. The manufactured home must have an identifiable tag. Most lenders are unwilling to offer VA loans for manufactured homes due to the increased risk these loans often carry.
Check with your lender about interest-rate reduction refinancing on your existing VA loan. This is a great advantage and there’s no need to re-establish VA loan eligibility. Instead, ask your lender to use the VA’s “email confirmation procedure”. You may also re-use your VA loan eligibility for another VA loan.
The maximum amount the the VA will authorize a guarantee to your lender is 25% of the loan amount up to $121,000
The maximum VA home loan is $484,000.
The maximum guarantee in the states of HI and AK is 25 percent of the loan amount up to $169,912 . The maximum VA home loan in these states is $679,650.
The idea of buying a building intended as a rental property is sound, but VA mortgages aren’t intended for this purpose. If you buy a home with a VA home loan, you must certify that you intend to “personally” live in the house. There are naturally exceptions made for houses that are in the building stages when the sale is made, but the general rule is you must occupy the house within sixty days of the loan closing.
The occupancy requirement applies to all VA guaranteed loans except one: the Interest Rate Reduction Refinancing Loan or IRRRL. For these loans, the veteran is required to certify that the dwelling was previously occupied as the home.
Veterans who shop around will learn it’s possible to get a fixed rate loan, negotiated with the lender of your choice. Another option? The adjustable rate loan, where interest may be adjusted one percent annually, up to five percent over the duration of the loan period. Which to choose? No matter which way you think is best, do your homework, shop around and get the best rate possible. Some make the mistake of taking the first offer that sounds fair, but don’t be intimidated by the process. You may be eager to get the “hard part” over with and get into a home.
Take some time to research the biggest purchase of your life! When in doubt, consult an expert, a legal advisor or a trusted friend in the real estate business. The more research you do, the better you’ll feel at closing time. The VA is in the business of loan guaranty, but the choice of which loan to take is strictly up to you. It’s also a good idea to look for businesses who make a habit of cultivating customers who are veterans–you may find their expertise in VA matters quite valuable to reduce unnecessary waiting times on paperwork.
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