American Veterans and the VA Loan

If you are active-duty or a veteran, you maybe eligible for a VA loan.  The eligibility requirements vary depending on your status.

Eligibility Requirements

• Active duty military after 181 days of service
• National Guard and Reservists after six years of service. However, if called to active duty these military personnel are eligible after 181 days of service.
• Served active duty for 90 consecutive days during wartime
• Spouse of a service member who died in the line of duty or from a service-related injury

A VA loan is a type of mortgage that is provided by private lenders but has the backing of the Department of Veterans Affairs.  While there are no limitations on the amounts you can borrow, there are limits on the amounts the VA will guarantee.

An advantage of a VA loan is that they typically offer lower rates than conventional mortgages.  These government-backed loans may only be used to purchase your primary residence.  Many are attracted to this loan option as there are no-down-payment loans and are easier to access in terms of credit and income requirements than traditional loans.

The VA loan entitlement is the lesser of $36,000 or 25 percent of the total loan amount if the borrower defaults.  A general rule of thumb is that a lender will extend a loan at four times the amount (36k x 4 = $144k).  However, there is also a bonus entitlement also known as a second-tier entitlement.  This entitlement uses the conventional financing conforming loan limit established by the Federal Housing Finance Agency (FHFA) to determine the bonus entitlement amounts.  In 2019 the FHFA established the loan limits at $484,350 (higher in high-priced areas).  Thus, with the 25 percent backing the 2019 bonus entitlement is $85,087 and when combined with the basic $36,000 entitlement, most lenders will generally loan eligible borrowers up to $484,350. Amounts will vary by area, so ask your loan officer about your entitlements where you are planning to purchase.

Other items to know about the VA loan:

• A one-time funding fee will apply which will vary based on the amount of the down payment and military category.
• VA loans do not require the purchase of private mortgage insurance (PMI) which is required for other low-down-payment mortgages.
• Existing VA borrowers can lower their interest rates via the Interest Rate Reduction Refinance Loan (IRRL).
• There is not a minimum credit score. However, your lender may have their own requirements.
• Borrowers are typically expected to inhabit their home purchased with a VA loan within 60 days of purchase.

Pre-Qualifying for a VA loan

If you plan to pre-qualify for a VA loan you first must apply for a VA Loan Certificate of Eligibility (COE). You can request a COE from your lender or apply online at VA.Gov.

Depending on your status you may be required to provide one of the following to receive the COE:

• DD Form 214
• Up-to-date statement of service signed by the adjutant, commander of the unit or HQ, or personnel office.
• NGB Form 23
• Copy of the latest annual retirement points statement and evidence of honorable discharge.
• VA Form 26-1817 (plus veteran’s DD214)
• VA Form 21-534 (plus veteran’s DD214, marriage license, and death certificate or DD Form 1300)

At First Home Mortgage, we honor all our active duty and veterans.  We use our expertise in the VA lending process to help each eligible borrower to have the best experience for their specific situation.

Contact us today, and let us help you get started on the path of purchasing the home of your dreams.

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