The more you know about the VA Home Loan Program, the more you will realize how little "red tape" there really is in getting a VA loan. These loans are often made without any down payment at all, and frequently offer lower interest rates than ordinarily available with other kinds of loans. 

Aside from the veteran's certificate of eligibility and the VA assigned appraisal, the application process is not much different than any other type of mortgage loan. And if the is approved for automatic processing, as more and more s are now, a buyer's loan can be processed and closed by the without waiting for VA's approval of the credit application. 

Additionally, if the is approved under VA's Appraisal Processing Program (LAPP), the may review the appraisal completed by a VA - assigned appraiser and close the loan on the basis of that review. The LAPP process can further speed the time to loan closing. 

5 Steps To A VA Loan

1.Apply for a Certificate of Eligibility. A veteran who doesn't have a certificate can obtain one easily by making application on VA Form 26-1880, Request for Determination of Eligibility and Available Loan Guaranty Entitlement, to the local VA office. 

2.Decide on a home the buyer wants to buy and sign a purchase agreement 

3.Order an appraisal from VA. (Usually this is done by the .) Most VA regional offices offer a "speed-up" telephone appraisal system. Call the local VA office for details. 

4.Apply to a mortgage for the loan. While the appraisal is being done, the (mortgage company, savings and loan, bank, etc.) can be gathering credit and income information. If the is authorized by VA to do automatic processing, upon receipt of the VA or LAPP appraised value determination, the loan can be approved and closed without waiting for VA's review of the credit application. For loans that must first be approved by VA, the will send the application to the local VA office, which will notify the of its decision. 

5.Close the loan and move in. 

VA Entitlement Remaining Entitlement 

Veterans who had a VA loan before may still have "remaining entitlement" to use for another VA loan. The current amount of entitlement available to each eligible veteran is $36,000. This was much lower in years past and has been increased over time by changes in the law. For example, a veteran who obtained a $25,000 loan in 1974 would have used $12,500 guaranty entitlement, the maximum then available. Even if that loan is not paid off, the veteran could use the $23,500 difference between the $12,500 entitlement originally used and the current maximum of $36,000 to buy another home with VA financing. An additional $14,750, up to a maximum entitlement of $50,750 is available for loans above $144,000 to purchase or construct a home. Most s require that a combination of the guaranty entitlement and any cash down payment must equal at least 25 percent of the reasonable value or sales price of the property, whichever is less. Thus, in the example, the veteran's $23,500 remaining entitlement would probably meet a 's minimum guaranty requirement for a no down payment loan to buy a property valued at and selling for $94,000. The veteran could also combine a down payment with the remaining entitlement for a larger loan amount. 

Restoration of Entitlement 

Veterans can have previously-used entitlement "restored" to purchase another home with a VA loan if: The property purchased with the prior VA loan has been sold and the loan paid in full, or a qualified veteran-transferee (buyer) agrees to assume the VA loan and substitute his or her entitlement for the same amount of entitlement originally used by the veteran seller. 

Remaining entitlement and restoration of entitlement can be requested through the nearest VA office by completing VA Form 26-1880. The entitlement may also be restored one time only if the veteran has repaid the prior VA loan in full but has not disposed of the property purchased with the prior VA loan.

VA Financing Benefits

More than 29 million veterans and service personnel are eligible for VA financing. Even though many veterans have already used their loan benefits, it may be possible for them to buy homes again with VA financing using remaining or restored loan entitlement. 

Before arranging for a new mortgage to finance a home purchase, veterans should consider some of the advantages of VA home loans 

1. Most important consideration, no down payment is required in most cases. 

2. Loan maximum may be up to 100 percent of the VA-established reasonable value of the property. Due to secondary market requirements, however, loans generally may not exceed $203,000. 

3. Flexibility of negotiating interest rates with the . 

4. No monthly mortgage insurance premium to pay. 

5. Limitation on buyer's closing costs. 

6. An appraisal which informs the buyer of property value. 

7. Thirty year loans with a choice of repayment plans: 
a. Traditional fixed payment (constant principal and interest; increases or decreases may be expected in property taxes and homeowner's insurance coverage); 
b. Adjustable Rate Mortgage-ARM (lower initial interest rate may allow qualification for a higher loan amount. Annual interest rate adjustment is limited to 1 percent and maximum increase in the interest rate over the life of the loan is capped at 5 percent) . 
c. Graduated Payment Mortgage--GPM (low initial payments which gradually rise to a level payment starting in the sixth year); and 
d. In some areas, Growing Equity Mortgages-GEMs (gradually increasing payments with all of the increase applied to principal, resulting in an early payoff of the loan). 

8. For most loans for new houses, construction is inspected at appropriate stages to ensure compliance with the approved plans, and a 1-year warranty is required from the builder that the house is built in conformity with the approved plans and specifications. In those cases where the builder provides an acceptable 10-year warranty plan, only a final inspection may be required. 

9. An assumable mortgage, subject to VA approval of the assumer's credit. 

10. Right to prepay loan without penalty. 

11. VA performs personal loan servicing and offers financial counseling to help veterans avoid losing their homes during temporary financial difficulties. 

VA Eligibility

Veterans with active duty service, that was not dishonorable, during World War II and later periods are eligible for VA loan benefits. World War II (September 16, 1940 to July 25, 1947), Korean conflict (June 27, 1950 to January 31, 1955), and Vietnam era (August 5, 1964 to May 7, 1975) veterans must have at least 90 days' service. Veterans with service only during peacetime periods and active duty military personnel must have had more than 180 days' active service. Veterans of enlisted service which began after September 7, 1980, or officers with service beginning after October 16, 1981, must in most cases have served at least 2 years. 

Persian Gulf Conflict. Basically, reservists and National Guard members who were activated on or after August 2, 1990, served at least 90 days and were discharged honorably are eligible. VA regional office personnel may assist with eligibility questions. 

Members of the Selected Reserve, including National Guard, who are not otherwise eligible and who have completed 6 years of service and have been honorably discharged or have completed 6 years of service and are still serving may be eligible. The expanded eligibility for Reserves and National Guard individuals will expire October 28, 1999. Contact the local VA office to find out what is needed to establish eligibility. Reservists will pay a slightly higher funding fee than regular veterans. 

VA Offices

VA has toll-free numbers for the convenience of veterans and dependents:

VA Benefits 1-800-827-1000
Life Insurance 1-800-669-8477
Debt Management Center 1-800-827-0648
Education Loans 1-800-326-8276
Telecommunication Device for the Deaf (TDD) 1-800-829-4833
CHAMPVA 1-800-733-8387
Headstones and Markers 1-800-697-6947
Persian Gulf Help line 1-800-PGW-VETS
Internet Web Address: http://www.va.gov/
VA ONLINE 1-800-US1-VETS (871-8387)

VA Funding Fees

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. 

VA Bankruptcy

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 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 s must follow when making a VA loan. In 95% of the cases, s make the decision to approve a loan without VA's prior approval. Keep in mind that s also have money at risk in giving you a VA loan, so they may have stricter credit standards than those mandated by VA.

VA Loan Costs Funding Fee 

A basic funding fee of 2.0 percent must be paid to VA by all but certain exempt veterans. A down payment of 5 percent or more will reduce the fee to 1.5 percent and a 10 percent down payment will reduce it to 1.25 percent. 

A funding fee of 2.75 percent must be paid by all eligible Reserve/National Guard individuals. A down payment of 5 percent or more will reduce the fee to 2.25 percent and a 10 percent down payment will reduce it to 2.0 percent. 

The funding fee for loans to refinance an existing VA home loan with a new VA home loan to lower the existing interest rate is 0.5 percent. 

Veterans who are using entitlement for a second or subsequent time who do not make a down payment of at least 5 percent are charged a funding fee of 3 percent. 

NOTE: For all VA home loans, the funding fee may be paid in cash or it may be included in the loan. 

Other Closing Costs 

Reasonable closing costs may be charged by the . These costs may not be included in the loan. The following items may be paid by the veteran purchaser, the seller, or shared. Closing costs may vary among s and also throughout the nation because of differing local laws and customs. 

VA appraisal, Credit report, Loan origination fee (usually 1 percent of the loan), Discount points, Title search and title insurance, Recording fees, State and/or local transfer taxes, if applicable, Survey 

No commissions, brokerage fees or "buyer broker" fees may be charged to the veteran buyer. 

How to get a VA Loan/VA Appraisal- Certificate of Reasonable Value 

The CRV (certificate of reasonable value) is based on an appraiser's estimate of the value of the property to be purchased. Because the loan amount may not exceed the CRV, the first step in getting a VA loan is usually to request an appraisal. Anyone (buyer, seller, real estate personnel or ) can request a VA appraisal by completing VA Form 26-1805, Request for Determination of Reasonable Value. After completing the form, it can either be mailed to the Loan Guaranty Division at the nearest VA office for processing or an appraisal can be requested by telephoning the Loan Guaranty Division for assignment of an appraiser. The local VA office may be contacted for information concerning its assignment procedures. The appraiser will send a bill for his or her services to the requester according to a fee schedule approved by VA. To simplify things, VA and HUD/ (Department of Housing and Urban Development/Federal Housing Administration) use the same appraisal forms. Also, if the property was recently appraised under the HUD procedure, under certain limited circumstances, the HUD conditional commitment can be converted to a VA CRV. The local VA office can explain how this is done. 

It is important to recognize that while the VA appraisal estimates the value of the property, it is not an inspection and does not guarantee that the house is free of defects. Homebuyers should be encouraged to carefully inspect the property themselves, or to hire a reputable inspection firm to help in this area. VA guarantees the loan, not the condition of the property. 

Application 

The application process for VA financing is no different from any other type of loan. In fact, the VA application form is the same as that used for HUD/ and conventional loans. The mortgage verifies the applicant's income and assets, and obtains a credit report to see that other obligations are being paid on time. If all is well and the appraised value of the property is enough to cover the loan needed, the in most instances, can then close the loan under VA's automatic procedure. Only about 10 percent of VA loan applications have to be submitted to a VA office for approval before closing.

VA Loan Uses

1.To buy a home, including townhouse or condominium unit in a VA-approved project. 
2.To build a home. 
3.To simultaneously purchase and improve a home. 
4.To improve a home by installing energy-related features such as solar or heating/cooling systems, water heaters, insulation, weather-stripping/ caulking, storm windows/doors or other energy efficient improvements approved by the and VA. These features may be added with the purchase of an existing dwelling or by refinancing a home owned and occupied by the veteran. A loan can be increased up to $3,000 based on documented costs or up to $6,000 if the increase in the mortgage payment is offset by the expected reduction in utility costs. A refinancing loan may not exceed 90 percent of the appraised value plus the costs of the improvements. Check with a or VA for details. 
5.To refinance an existing home loan up to 90 percent of the VA-established reasonable value or to refinance an existing VA loan to reduce the interest rate. 
6.To buy a manufactured home and/or lot. 

VA Eligibility Questions

How do I apply for a VA guaranteed loan?
You can apply for a VA loan at any mortgage 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 that you are eligible for a VA loan. 

How do I get a Certificate of Eligibility?
To get a Certificate of Eligibility, you need to submit a 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 DD214 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. 

I already got one VA loan. Can I get another one?
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, the veteran 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 pay-off statement from the former 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. 

I sold the property I obtained with my prior VA loan on an assumption. Why can't I get my entitlement restored to use for a new home? 
In this case the veteran's 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 the original veteran. Otherwise, the original veteran cannot have entitlement restored until the assumer has paid off the VA loan. 

My prior VA loan was assumed, the assumer defaulted on the loan, and VA paid a claim to the . VA said it wasn't my fault and waived the debt. Now I need a new VA loan but am told that I am not eligible. Why not? or My prior loan was foreclosed on, or I gave a Deed in Lieu of Foreclosure, or VA paid a compromise claim. I was released from liability on the loan and/or the debt was waived. Can I get another VA loan? 
Although the veteran's debt was waived by VA, the Government has still suffered a loss on the loan. The law does not permit the veteran's entitlement to be restored until the loss has been repaid in full. 

VA Eligibility And Spouses

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 s to determine whether they would be willing to accept applications for joint loans of this type. s that are willing to make these types of loans will likely require a down payment to cover risk on the un-guaranteed, non-veteran's portion of the loan. Unlike other loans, the 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.

VA Loan Size

There is no limit on the size of a VA guaranteed home loan, provided that the veteran is qualified for the loan from a credit and income standpoint. However, as a practical matter, s will generally limit the maximum loan amount to 4 times the amount of the veteran's available entitlement plus any down payment. Currently, the maximum entitlement on Va loans is $417,000.00.