VA Loan Questions and Answers
You can apply for a VA loan at any mortgage company that participates in the VA home loan program. At some point, you will need to get a Certificate of Eligibility from VA to prove to the mortgage company that you are eligible for a VA loan.
To get a Certificate of Eligibility, you need to submit form 26-1880, Request for Determination of Eligibility and Available Loan Guaranty Entitlement. A copy of the form can be obtained by calling 800-827-1000. Send it to any VA Regional Office. You must include a copy of your DD-214 with the form 26-1880. If you are on active duty, you must submit a statement of service signed by, or by direction of, the adjutant, personnel officer, or commander of your unit or higher headquarters showing date of entry on your current active duty period and the duration of any time lost.
VA credit standards state that a veteran with a bankruptcy less than 3 years ago would generally not be considered a satisfactory credit risk unless: the veteran or spouse has obtained items on credit since the bankruptcy and has paid the obligations in a satisfactory manner for a continued period; and the bankruptcy was caused by circumstances beyond the control of the borrower, which would have to be verified. A bankruptcy discharged 3 to 5 years ago must be given some consideration in the underwriting of the loan. A bankruptcy discharged more than 5 years ago may be disregarded. These are the minimum standards that mortgage companies must follow when making a VA loan. In 95% of the cases, companies make the decision to approve a loan without VA’s prior approval. Keep in mind that mortgage companies also have money at risk in giving you a VA loan, so they may have stricter credit standards than those mandated by VA.
Yes, depending on the circumstances. If you have paid off your prior VA loan and disposed of the property, you can have your entitlement restored for additional use. To obtain restoration of entitlement, you must send VA a completed VA Form 26-1880, along with evidence that the property has been disposed of and the loan repaid in full. This evidence can be in the form of a payoff statement from the former mortgage company, or a copy of the HUD-1 settlement statement completed in connection with the sale of the property. The application can be presented to any VA Regional Office. A veteran can also obtain restoration of entitlement, on a one time basis, if the prior VA loan has been paid in full but the property has not been sold.
VA guaranteed loans are made by private lenders, such as banks, savings & loans. or mortgage companies to eligible veterans for the purchase of a home which must be for their own personal occupancy. To get a loan, a veteran must apply to a lender. If the loan is approved, VA will guarantee a portion of it to the lender. This guaranty protects the lender against loss up to the amount guaranteed and allows a veteran to obtain favorable financing terms. There is no maximum VA loan but lenders will generally limit VA loans to $417,000. This is because lenders sell VA loans in the secondary market, which currently places a $417,000 limit on the loans. For loans up to this amount, it is usually possible for qualified veterans to obtain no down payment financing. A veteran’s basic entitlement is $36,000 (or up to $89,912 for certain loans over $144,000). Lenders will generally loan up to 4 times a veteran’s available entitlement without a down payment, provided the veteran is income and credit qualified and the property appraises for the asking price.
The VA funding fee is required by law. The fee, currently 2 percent on no down payment loans, is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a down payment is 3 percent. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment. Second time users who make a down payment of at least 5 percent pay a reduced funding fee of 1.5 percent, the same as first time users making the same down payment. For a 10 percent down payment, the fee drops to 1.25 percent. The effect of the funding fee on a veteran’s financial situation is minimized since the fee may be financed in the loan.
Yes, but the guaranty is based only on the veteran’s portion of the loan. The guaranty cannot cover the non veteran’s part of the loan. Consult mortgage companies to determine whether they would be willing to accept applications for joint loans of this type. Mortgage companies that are willing to make these types of loans will likely require a down payment to cover risk on the non guaranteed, non veteran’s portion of the loan. Unlike other loans, the mortgage company must submit joint loans to VA for approval before they are made. Both incomes can be used to qualify for the loan. However, the veteran’s income must be sufficient to repay at least that portion of the loan related to the veteran’s interest in (portion of) the property and the non veteran’s income adequate to cover the rest.
In this case your entitlement can be restored only if the assumer is also an eligible veteran who is willing to substitute his or her entitlement for that of your original entitlement. Otherwise, you cannot have entitlement restored until the assumer has paid off the VA loan.
Although your debt was waived by VA, the Government has still suffered a loss on the loan. The law does not permit your entitlement to be restored until the loss has been repaid in full.