I got a call from a friend here in Austin that told me his brother wanted to buy a house. His brother, a Veteran, lives in North Carolina but was moving to Laredo and wanted to buy the home his mom used to own. Not just that, but he had his "Green Sheet," or his VA Certificate of Eligibility that "qualified" him for a VA mortgage. I talked to his brother. Unfortunately, his VA eligibility didn't qualify him for a home loan.

What's that? Doesn't VA eligibility for a home loan automatically qualify someone to get a VA mortgage? Unfortunately, no.

The Department of Veterans Administration, or VA in home lingo terms, isn't a home loan guarantee. Instead, the VA guarantees that "if" home loans that are underwritten to VA standards ever go bad, the VA will pay the VA-issuing lender their money back. But the Veteran still has to qualify. This Vet had several credit problems, namingly collection accounts; his wife had just declared personal bankruptcy and he had just a couple of open trade lines that he had paid on time. His credit scores were very, very low. I gave him the bad news, that his credit wouldn't allow for VA financing as it stood.

I also told him that his ratios were kinda high for VA, namely close to 50 percent and that he should think about borrowing a little less so a VA lender would be more likely to approve him when his credit ratings got back up to par. Do you know what? He got mad at me, told me that I was trying to steer him into a predatory loan and that he knew for a fact that he could qualify for a VA loan because another lender told him so.

I apologized to him, told him again what I could and couldn't do, then he pretty much hung up on me. I called my buddy and told him I didn't think his brother was going to use me and that he was going to use someone else. He asked me why, was it because he had terrible credit? I said, "Yeah, mostly." Then guess what? He told me that he thought if a Veteran got his VA Certificate of Eligibility then it doesn't matter what the Vet's credit looked like. Looks like I was being hit from both sides so I just told him that I wasn't able to help him right now but by all means if someone else said they could then call them back and get the loan.

Sure enough, almost a month later, I got another call from my friend. "Dave, you were right." That's hardly a good thing to hear when it's your friend's brother that's trying desperately to get financed. It seems that the other loan officer in fact told him that the VA Certificate automatically qualified him. This in light of the fact that the loan officer had little to no experience in VA lending. Instead, the loan officer kept trying other VA lenders to see if he could get the deal approved. Of course, he couldn't.

That got me to thinking: That was three people (one who should know better) who all thought that applying for and receiving that green sheet of paper called the VA Certificate of Eligibility meant "automatic loan approval." It doesn't. It simply means one is eligible for a VA loan, not that loan approval is guaranteed. Remember that if you've just gotten your VA eligibility or know someone who has. The Vet still has to get qualified, regardless of the Certificate.

Published: November 5, 2004

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, a veteran Mortgage Banker, successful Real Estate Consultant and author of Your Guide to VA Loans, Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan, Who Says You Can't Buy a Home!, and Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You, is a former columnist and Contributing Editor with San Diego-based Mortgage Originator Magazine. Reed is President of CD Reed Mortgage Bankers, Austin, TX and is a Past President of the Austin Mortgage Bankers Association.