VA Home Loans
The VA Loan provides veterans with a federally guaranteed home loan which requires no down payment. This program was designed to provide housing and assistance for veterans and their families.
The Veterans Administration provides insurance to lenders in the case that you default on a loan. Because the mortgage is guaranteed, lenders will offer a lower interest rate and terms than a conventional home loan. VA home loans are available in all 50 states. A VA loan may also have reduced closing costs and no prepayment penalties.
Additionally there are services that may be offered to veterans in danger of defaulting on their loans. VA home loans are available to military personnel that have either served 181 days during peacetime, 90 days during war, or a spouse of a serviceman either killed or missing in action.
What is a VA Loan?
The Veterans Administration's loan originated in 1944 through the Servicemen's Readjustment Act, also known as the GI Bill. It was signed into law by President Franklin D. Roosevelt and was designed to provide veterans with a federally guaranteed home loan with no down payment. VA loans are made by private lenders like banks, savings & loans, and mortgage companies to eligible veterans for homes to live in. The lender is protected against loss if the loan defaults.
Who is eligible for a VA Loan?
Wartime and conflict veterans (not dishonorably discharged, with at least 90 days of service) qualify from these service windows:
- World War II: September 16, 1940 – July 25, 1947
- Korean War: June 27, 1950 – January 31, 1955
- Vietnam War: August 5, 1964 – May 7, 1975
- Persian Gulf War, Afghanistan, and Iraq service: check current requirements at www.va.gov
Peacetime service requires at least 181 days of continuous active duty with no dishonorable discharge (an earlier discharge for a service-related disability may still qualify):
- July 26, 1947 – June 26, 1950
- February 1, 1955 – August 4, 1964
- May 8, 1975 – September 7, 1980 (enlisted), or through October 16, 1981 (officer)
- Enlisted after September 7, 1980, or an officer after October 16, 1981: 24 months of continuous active duty and an honorable discharge are required
Reserves, National Guard, and other cases: certain U.S. citizens who served in the armed forces of an allied government during World War II; the surviving spouse of a veteran who died as a result of service and has not remarried; and the spouse of a service member listed as a prisoner of war or missing in action for more than 90 days.
What type of home can I buy with a VA loan?
A VA loan must finance your personal residence within the United States or its territories. Your choices include:
- An existing single-family home
- A townhouse or condominium in a VA-approved project
- A new-construction residence
- A manufactured home or lot
- Home refinances and certain home improvements
What are the benefits of a VA Loan?
- 100% financing and no down payment
- No private mortgage insurance (PMI)
- No prepayment penalties
- Competitive interest rates
- Easier qualification standards than conventional loans
- Sellers can pay some of your closing costs
- May be combined with down-payment assistance programs to reduce closing costs
How do I apply for a VA guaranteed loan?
You can apply with any lender that participates in the VA home loan program. At application you will need your Certificate of Eligibility — submit VA Form 26-1880 — along with proof of military service from a VA Eligibility Center.
If I have already obtained one VA Loan, can I get another one?
Yes — your eligibility is reusable. It is restored when the prior VA loan is paid off and the property is disposed of. On a one-time basis, eligibility may also be restored if the prior loan is paid in full but you still own the property. Send the completed VA form to the VA Eligibility Center along with proof of payoff, such as a paid-in-full statement or a HUD-1 settlement statement.
What are the disadvantages of a VA Loan?
- VA loans made before March 1, 1988 can be assumed with no qualifying of the new buyer — the veteran may remain liable if that buyer defaults
- Some sellers hesitate to accept VA offers because the loans can take longer to process
- Sellers are often asked to pay some closing costs, so they may be less likely to negotiate on the sales price