This article is dedicated to the men and women that have served our country in the armed forces. My purpose is to make veterans aware of the VA home loan programs available to them and to dispel many common myths about these programs. It will also detail qualifications for these programs and contains eligibility information for National Guard people and Reservists. You need not be a veteran of a war to take advantage of the VA home loan program.

Perhaps the most important facet of the VA loan program is that eligible veterans can buy almost any home with no down payment. Closing costs, with the exception of the VA funding fee, cannot be financed into the loan amount. However, the seller can pay for all your closing costs, prepaids and 4% of the purchase price of the home in other concessions. This doesn't necessarily mean the seller will pay all that, but unless you are in a "Seller's Market", it shouldn't hurt to ask.

Who is eligible for a VA guaranteed home loan? Generally speaking, if you completed the original tour of active duty or if you were medically discharged, you should be eligible for a VA home loan. Many people are eligible if they served for more than 180 days on active duty. The amount of time required is based on when you were in the service. You generally must have received a general or honorable discharge. National Guard and Reservist personnel are eligible after 6 years of service. Desert Storm veterans are eligible regardless of their length of active duty or reserve service. Unmarried surviving spouses of veterans that died due to service related causes may also be eligible.

How do I qualify for a VA loan? Being eligible does not mean you are qualified. To get a VA home loan your income and job history must be stable, you must have reasonably good credit and not be over obligated. Normally VA will allow 41 - 45% of your pretax monthly income to go towards credit debts and new house payment. In addition to your other credit obligations, VA considers alimony, child support and child care expense as revolving debt when qualifying you for a loan. VA also has a second, more complex formula that they use to insure your income is sufficient. VA will take the lower payment from the 2 formulas when determining your maximum house payment.

How many times can I use my VA home loan benefits? You can use your VA home loan more than once! One of the most common myths about VA loans is that once you use your VA loan you can never use it again. Your eligibility is restored by paying off the previous VA mortgage or having an eligible qualified veteran assume your loan and substitute his eligibility for yours. You may even have enough eligibility to purchase a home even if your previous VA loan isn't paid off. The formula for calculating the amount of remaining eligibility is complex and the second and subsequent times may have slightly higher funding fees than your first loan.

There are special breaks for disabled veterans. Disabled vets receiving compensation are able to purchase a home and pay no funding fee. This can be a tremendous savings. Be sure to tell your real estate agent and loan officer if you are a disabled vet! Certain veterans that are very disabled may qualify for grants from VA. If you want information about the grant programs, contact your local VA office.

How do I get a VA home loan? If you are out of the service, try to find copy 4 of your DD214. It will take about eight weeks to get one otherwise. If you are still active duty, you will need a "Statement of Service" from your personnel office on the military base you serve on. After the agent you are working with or I receive the DD214 or Statement of Service, we will order your VA Certificate of Eligibility and proceed from there. You can also contact a VA lender in your area.

What happens if someone assumes my VA loan? VA loans are assumable. Loans closed prior to March 1988 could be assumed by anyone without qualification. Loans after March of 1988 are assumable by qualified buyers. The veteran remains completely liable on these loans unless the veteran receives a "Release of Liability" from the VA. The release of liability does not restore the Veteran's Entitlement unless a qualified borrower first gets a the veteran released from liability and substitutes his VA entitlement for the previous veteran's. If you do not receive a restoration of your entitlement, the portion of the eligibility used on your previous home loan will not be restored until the loan is paid off. If you do not receive a Release of Liability, you are still liable for the note to VA if the person assuming your loan defaults - even if they qualified to assume it.

My VA eligibility is tied up, now what? You have a couple of options. You can still get a VA loan with the remaining amount of your entitlement. Remember that you need enough cash or entitlement to cover only 25% of the purchase price to be eligible for the VA loan program. There is also a FHA program for veterans that offers a lower than normal down payment This program for is good for vets that have their eligibility tied up or don't meet VA's qualifying ratios. Feel free to contact me via E-mail if you have any questions about these options.

Published: September 7, 1998

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