The concept of VA entitlement is often a confusing one.
You can think of it as something you’re entitled to given your service to our nation. This is certainly a hard-earned and well-deserved benefit. But that’s not what it really means, at least in practical terms.
Veterans who are eligible for a VA loan have an entitlement, which is basically a dollar amount the VA promises to repay back to a lender in the event you default on your mortgage.
We’ve had a few questions and opportunities for clarification at the VA Loans Insider page on Facebook recently regarding VA home loan eligibility and the nature of the VA loan guaranty. It’s a good idea to step back and offer a snapshot of VA loan qualifications and reiterate a mantra we’ve stressed several times: Being eligible for a VA loan does not guarantee you will get one.
It comes as a surprise to some, but one of the myriad benefits of VA loans is that qualified veterans with non-VA home mortgages can refinance into a VA loan and reap the program’s benefits.
The VA Cash-Out refinance is the only way to make it happen. See More
It’s important to remember that being eligible for a VA loan and actually getting one are two very different concepts.
To be eligible means the VA has determined you meet the initial VA loan eligibility requirements and have earned some degree of home loan entitlement. But your Certificate of Eligibility isn’t a coupon you can just redeem for a VA loan or refinance of your choice.
Even if you’re positive you meet the eligibility requirements for a VA loan, there’s only one way to be sure: Obtain your Certificate of Eligibility.
This is where the VA separates belief from reality.
The VA loan program has helped more than 18 million service members achieve the dream of homeownership since 1944.
Today, these flexible loans remain the safest and most powerful lending option on the market for military borrowers and their families. Qualified veterans can purchase a home without having to spend money on a down payment, private mortgage insurance and in some cases even closing costs.
In fact, scores of our borrowers purchase a home without spending a dime up front.
But millions of veterans and active duty personnel are missing out.
Fewer than 13 percent of the country’s 25 million veterans have utilized their VA loan benefits, according to an agency study released in 2009. Many service members don’t think they qualify for a VA loan or aren’t sure how to pursue one.
But a whopping 20 percent of veterans didn’t even know there was was a VA home loan benefit, according to a 2004 survey. That’s a shocking statistic, and it underscores the need for greater education and awareness regarding the important benefits available to those who served our country.
This loan program was create to honor their service and sacrifice. VA loans continue to make homeownership possible for thousands of veterans who might otherwise struggle to secure financing. About 80 percent of VA borrowers could not qualify for a conventional loan.
Spread the Word
The VA purchase and VA refinance benefits provided by the VA Loan Guaranty Program are becoming increasingly crucial in the current lending environment. Lenders have tightened credit and underwriting requirements in the wake of the subprime mortgage meltdown. It’s getting tougher for some prospective borrowers to obtain financing.
That’s where VA loans can become a lifeline. These government-backed loans help level the playing field and keep homeownership possible for veterans and active duty personnel who might not have sterling credit or the resources for a sizable down payment.
The key is to make sure military members and their families are aware of the benefits available. In some cases, a VA loan isn’t always going to be the best solution for a particular borrower. But it should always be an option.
It’s a benefit our veterans and active duty service members have earned through their commitment and dedication to our country.
To see if you’re eligible for a VA loan or to learn more about what’s available, visit Veterans United Home Loans or contact a loan specialist at 1-888-212-1958.
Image: Allan Ferguson
Thousands of surviving spouses currently ineligible for VA home loan benefits would gain access to the program if a U.S. House bill passed Wednesday becomes law.
The VA Loan Guaranty program has helped more than 18 million service members become homeowners since 1944. The program provides no-down payment, government-backed mortgages and features less stringent credit and underwriting guidelines than other loan programs.
But in its present form, the loan program is only open to surviving spouses of veterans whose death is linked to a service-connected disability. The bill, the Disabled Veterans’ Surviving Spouses Home Loans Act, would eliminate that stipulation and grant VA loan eligibility to all surviving spouses of permanently disabled veterans.
Income and employment are two basic elements in securing a home loan. But don’t let your assumptions about what is required discourage you from pursuing a VA loan, because the agency’s requirements allow for some flexibility in assessing both.
When it comes to employment, the VA and its approved lenders are looking for stability, consistency and a likelihood that those conditions will continue. The gold standard is two years of steady employment.
But the real world is rarely that tidy. And that’s why prospective borrowers should talk with a VA loan specialist about their unique employment circumstances.
Prospective borrowers don’t always have two years of steady employment. That doesn’t mean they’re immediately disqualified from securing a loan.
Recently discharged veterans may have held a job for just weeks or months before deciding to pursue a VA-guaranteed home loan. It’s often a case-by-case basis that tests the patience and flexibility of an underwriter. Will they keep their job and a steady stream of income flowing? Do they have any employment experience or expertise beyond their military training?
This is where a letter of explanation from either the veteran or an employer can make a huge difference for many borrowers. Prospective borrowers who are working in a field that utilizes their skill set or previous work in the military can often overcome that shortfall in terms of time on the job.
Veterans who are self-employed or who make a living in the building trades, doing seasonal work or working mostly on commission have some additional paperwork hurdles to face. Tax returns for the previous two years will be essential in verifying income.
To count income from overtime work, part-time jobs, second jobs and bonuses, the veteran needs to show that same two-year period of stability.
For commission-based workers, the longer you’ve been employed the better. The VA will rarely guarantee a loan for veterans who’ve been generating that income for less than two years. Anything short of that is generally considered unstable income, given the nature of commissions and sales-based jobs. There are some rare exceptions when the veteran has either previous related employment or some type of specialized training. But today anything short of that two-year benchmark is a tough sell.
The same typically holds true for self-employed veterans. Fledgling entrepreneurs in business less than two years usually can’t count that income as stable and reliable. As always, there are a few exceptions, but otherwise newly self-employed veterans will need additional sources of stable income in order to satisfy the VA and most lenders.
When it comes to buying a home, you have your list of requirements: number of bedrooms, full basement, stainless steel appliances and probably scores of others.
The VA also has a list of requirements for a home. But its list is centered on protecting the buyer against unexpected, and usually expensive, surprises.
The agency utilizes a series of Minimum Property Requirements, or MPRs, that a home must meet in order to qualify for a VA loan. These requirements help ensure that veterans and military families have a safe place to call home. See More
Contrary to what you’ve always believed, two is not necessarily better than one.
When it comes to a VA mortgage, the requirements for individual borrowers are simpler than those for two.
It can make sense for prospective home buyers to want or need a co-borrower on their loan. Utilizing another person’s income, credit score and debt level might do wonders for your ability to qualify for a loan.
But the VA doesn’t let qualified borrowers tack on anybody to their loan application. In most cases, in order to secure a VA loan, the only acceptable co-borrower is a spouse or another veteran who will maintain the property as his or her primary residence.
Does that mean you can’t secure a VA loan with your fiancée, your long-time significant other or your civilian neighbor?
Yes and no.
The VA doesn’t expressly prohibit co-borrowers who aren’t in those two acceptable categories. In those instances, the agency tells VA lenders that it will only guarantee the military member’s portion of the home loan. That could leave a big chunk of the mortgage exposed and without the kind of government-backed safety net the program relies upon.
And here’s where VA regulations meet cold, hard truth on the ground.