The VA home loan benefit is one of the most valuable for veterans; it provides the means for a qualifying borrower to explore home loan options without a down payment in typical cases, and for some borrowers there may be waivers for certain home loan fees.

VA loans feature the option to apply for a Streamline Refinance loan later on, using the original application information to qualify for the new loan. (See below)

These are just some of the reasons why it can be a smart idea to consider applying for a VA mortgage loan instead of a conventional loan or other non-VA options.

Some of the most attractive perks of the VA loan benefit are simply not available for conventional mortgages, and other government-backed loans may not offer the same types of advantages for some buyers-especially those who have VA disability ratings or are eligible to receive compensation for service-connected disabilities.

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VA Loans Are Used To Buy, Build, Or Refinance

You can use a VA mortgage to purchase, rehab, refinance, or build a single family home up to four units. These properties can be houses, condo units, town homes, co-ops, planned unit developments, and others. These loans are for owner-occupied residences and not for commercial properties or business enterprises.

No Down Payment Required For Most VA Loans

The no-money down option is a standard feature for VA mortgage loans. Borrowers are not required to make a down payment except under certain conditions related to creditworthiness or in cases where the appraisal is lower than the asking price.

Thanks to the VA loan “escape clause”, a borrower is not required to purchase a home in such cases, but those who choose to do so cannot finance the difference between the appraised value and the sales price.

Some Will Put Money Down Anyway

Some borrowers will choose to make a down payment on their VA home loan anyway as this can reduce the amount of your VA loan funding fee. In such cases, the down payment must be above a certain percentage to qualify for a discount on the fee–ask your loan officer how much you should realistically expect to pay in such cases based on the loan amount and the term of your mortgage.

VA Loans: No Private Mortgage Insurance Required

Private mortgage insurance, or PMI for short, is generally required by conventional lenders when a borrower does not make a high enough down payment. In general you may find conventional lenders requiring PMI when the loan-to-value ratio is 80% or higher.

That means in order to avoid PMI on a conventional loan you may be required to make a down payment totally 20% of the adjusted value of the home (or more). Credit scores can also be a factor, depending on circumstances.

The FHA single family loan program, another government-backed loan similar in many ways to VA mortgages, does not require private mortgage insurance, but does require an up front mortgage insurance premium and an annual premium paid over either the lifetime of the loan or for 11 years, depending on factors including (but not limited to) the loan-to-value ratio, and the duration of the loan.

Remember, this type of mortgage insurance protects the lender and is not the same thing as home owners insurance to protect your property from theft, fire, etc.

VA Loan Funding Fees

Remember, this type of mortgage insurance protects the lender and is not the same thing as home owners insurance to protect your property from theft, fire, etc.

It’s true that VA home loans do include a VA loan funding fee, which is affected by the amount of down payment you choose to pay (if any), and whether you are a first time buyer or have used your VA home loan benefits before. The people who qualify for the lowest VA loan funding fee are first-time buyers who choose to put 10% down on the loan.

The people who qualify for the lowest VA loan funding fee are first-time buyers who choose to put 10% down on the loan.

The VA loan funding fee is waived for all service members receiving or eligible to receive VA compensation for service-connected medical conditions or injuries. This requires the VA to have completed its process for determining the percentage of disability and awarding that amount to the veteran officially.

These waivers are NOT automatic and must be applied for. Those who wish to apply will be required to furnish a completed copy of VA Form 26-8937 which shows the exempt status of the borrower. Here’s a sample copy of VA Form 26-8937.

The VA loan funding fee waiver also applies to certain Purple Heart recipients who are still on active duty who furnish proof of the award before loan closing time.

In cases where a funding fee refund might be due at a later date, the lender will have the borrower make the payment and apply for the refund once the official VA notification of a disability award is obtained.

Refinancing From Non-VA Loans To VA Mortgages

VA loans are not just for new purchases-if a borrower has a non-VA mortgage and wants to refinance into a VA mortgage loan, this option is available for financially qualified borrowers. Those who wish to refinance from non-VA to VA mortgages will need to find a participating VA lender willing to perform the transaction.

VA loans can be refinanced into lower mortgage payments and/or interest rates with a VA Interest Rate Reduction Refinance Loan, also known as the VA IRRRL. Ask a participating VA lender about the VA-to-VA IRRRL option.

VA Refinance Loan Options

VA loans are similar to FHA mortgages in one important respect–both of these government-backed mortgage loan programs offer the borrower the ability to apply for a Streamline Refinance loan, which is sometimes referred to as an Interest Rate Reduction Refinance Loan or IRRRL.

These loans typically must result in a tangible benefit to the borrower. This can be in the form of a lower interest rate, a lower monthly payment, and can also be used to get out of an adjustable rate mortgage into a more stable and predictable fixed-rate loan.

These loans are unique as they have no VA required credit check or appraisal. If your lender does not require one anyway, this is a good opportunity to refinance without having to go through an extensive application process similar to the original mortgage.

Yes, you’ll still need to complete paperwork and work with the lender, but there are good reasons to consider this as a benefit to having your original VA loan.

VA mortgages are also assumable, which means that you (with the lender’s approval) can transfer your VA loan to another person and have them assume financial responsibility for the mortgage.

Another perk of VA mortgages is that they typically feature lower interest rates than conventional loans due to the government’s backing of the loan. But your credit scores and the current going rate will be important factors in the rate you negotiate with the lender. Keep that in mind when you are in the planning and saving stages of your home loan.

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Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News.

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VA Home Loans: How to Get Started	VA Home Loans for First Time Buyers
5 Benefits of a VA Loan	FAQs About VA Home Loans
VA Home Loan Eligibility	VA Home Loan Myths
VA Loan Tips	VA Refinance Loan Options

How do you get started with a VA home loan? The first step is to establish your eligibility for the program, which means serving a minimum time in uniform on active duty or as a member of the National Guard or Reserve with qualifying military service.

Military veterans, certain surviving spouses of vets, and certain members of the National Oceanic and Atmospheric Administration are all eligible to apply for VA loan benefits. Veterans and non-veterans are permitted to apply for a VA loan together, but the VA will guarantee only the veteran’s portion of the loan. This is known as a “joint loan” in the industry and you may need to ask for a joint loan by name. Your eligibility for the VA home loan program is reflected on a document required by your lender.

This is known as the VA Certificate of Eligibility (COE), which is provided when you have met the minimum time-in-service requirements.

Qualifying surviving spouses of military members who died as a result of military service must request their COE from the Department of Veterans affairs, but all others may be able to request the COE online using a VA benefits portal, by mail, or using the assistance of a participating lender.

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Qualifying for Veteran Loans

Veteran loan eligibility will greatly vary depending upon the length of service, the military branch of service, as well as the dates of service.

Usually, eligible recipients have to have served for a minimum quantity of time, as well as have to be either active service members or received honorable discharge. Those who serve today or join today are likely eligible after 90 days of continuous active duty service. Basic training time does not count.

The quantity of time in which you need to have served will depend on your responsibilities within the services. For instance, reservists generally have to have served for a minimum of 6 “creditable years” during peacetime,  those who have been on active duty for 90 days or more in present times may also qualify.

Uses For VA Home Loans

Qualifying borrowers can use VA mortgages to purchase single family residences meant to be owner-occupied.

These can be anywhere from one to four units, and may include mixed use property that is primarily residential and that will be occupied by the owner or qualifying family members. Business or commercial properties cannot be purchased with a VA mortgage.

Nor can intermittent-occupancy enterprises or related businesses be run out of a house purchased with a VA mortgage, which means no bed-and-breakfasts, no time shares, and no frathouses or sororities.

Where to Apply

VA home loans are offered by a network of participating lenders and you can use any VA lender to establish your eligibility, obtain a VA COE, and move forward with your mortgage.

The Department of Veterans Affairs in most cases does not lend money–that is reserved for the Native American Direct Loan program for purchases made that meet certain VA requirements including that the purchase be on tribal lands. You can Google “Participating VA Lender” or you can search for military friendly lenders.

VA Home Loan Details

VA home loans feature no required down payment in most cases, but making a down payment reduces your VA loan funding fee, which as of January 1, 2020 changed to reflect the following new requirements:

The VA loan funding fee for forward loans (not refinance or reverse mortgages) is lowest for first-time VA loan borrowers who make a down payment of at least 10%. There is usually no down payment requirement, but borrowers who choose to make one get the benefit in lower VA loan funding fees.

All VA home loan borrowers will be required to pay the VA loan funding fee unless they are exempt because they receive (or are eligible to receive) VA compensation for service-connected disabilities. The amount of the funding fee for non-exempt applicants is based on the following scale for VA purchase loans:

• First-time use with no money down – 2.3%
• 5 percent down – 1.65%
• 10 percent down – 1.4%

Second-time use VA loan funding fees are as follows:

• Less than 5 percent down – 3.6%
• 5 percent down – 1.65%
• 10 percent down or more – 1.4%

What You Need To Know About How To Get Started With A VA Mortgage

Before you get started applying for a VA mortgage, you’ll need to do three important things. The first is to (very early in your planning stages) pull your credit report and review it for errors, indications of identity theft, outdated information, etc.

Disputing items on your credit report takes time, often months, to resolve. You may be required to fill out police reports in the case of stolen identity issues, you may have to communicate with creditors, etc. Don’t put off doing this step, it’s crucial for planning, budgeting, and saving.

Budgeting And Saving For Your VA Mortgage

And that leads to the next issue–even though you won’t generally have a down payment requirement in typical VA loan cases, you will need to save money for other closing costs, moving expenses, inspection fees, and more. Don’t fill out loan paperwork until you know what to expect in closing costs, fees, and expenses. You’ll need to make a mortgage budget and plan accordingly.

And remember the first step mentioned above, pulling your credit report? You’ll want to plan on taking a minimum of 12 months to establish a record of on-time, every-time payments on all financial obligations.

Why?

Because your loan officer will use your payment history as a way to determine whether or not you are a good risk for a home loan.

When Saving For Your VA Home Loan

Keep in mind that you’ll need to anticipate certain fees and expenses such as termite inspections, appraisals, and the lender’s fee. It’s a very good idea to compare closing costs among VA lender as these expenses are not standardized and will vary from lender to lender.

How much is the lender you’re looking at now going to charge you for your VA home loan? How much would another lender charge by comparison? Shop around.

Payment History

Anything less than 12 months of on time payments on all financial obligations leading up to your home loan application puts your ability to qualify for the mortgage in jeopardy. A single missed payment might not be the kiss of death on a mortgage application, but remember that buying a home means operating in a competitive marketplace.

That means some borrowers are viewed as being better credit risks than others. You’ll want to do everything you can to help your loan officer decide you are a good risk.

VA mortgages do have more forgiving credit requirements than other types of home loans, but you’ll still be required to credit qualify like any other mortgage. And with VA home loans, there is no VA-defined FICO score approval range. It’s up to the lender to decide if your FICO scores make you a good risk or a bad credit risk.

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Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News

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VA Home Loan Tools	VA Home Loans for First Time Buyers
5 Benefits of a VA Loan	FAQs About VA Home Loans
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VA Loan Tips	VA Refinance Loan Options

With a VA loan, eligible borrowers can get a low-interest mortgage with no money down. Unfortunately, though, not all service members qualify for this benefit. As such, we’ll use this article to outline the military service requirements for VA loans.

Specifically, we’ll discuss the following:

• VA Loan Overview
• VA Loan Military Service Requirements for Veterans and Active Duty
• VA Loan Military Service Requirements for National Guard and Reserve
• What if I Don’t Meet the Minimum Military Service Requirements for a VA Loan?
• VA Loan and Discharge Status
• Final Thoughts

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VA Loan Overview

The Department of Veterans Affairs administers the VA home loan program. However, the VA doesn’t actually originate these loans. Instead, it guarantees the loans provided by VA-approved lenders (e.g. banks, credit unions, and mortgage lenders). If a borrower defaults on a loan, the VA will reimburse these lenders a portion of the outstanding loan balance. This guarantee significantly reduces lending risk, and this reduced risk allows lenders to offer the following outstanding VA loan terms:

• No down payment required
• No private mortgage insurance (PMI) required
• Low interest rates
• Streamlined refinancing option via the Interest Rate Reduction Refinance Loan (IRRRL)

However, not all troops meet the military service requirements for VA loan eligibility.

The VA Loan COE

If eligible, borrowers can apply for and receive a Certificate of Eligibility, or COE, from the VA. This certificate tells lenders A) that you meet the military service requirements for VA loan benefits, and B) how much remaining eligibility – or entitlement – you have. Borrowers can either request their COE from the VA directly, or they can ask their lenders to request it on their behalf.

In the following sections, we’ll explain the different ways that borrowers can meet the military service requirements for VA loans. This eligibility largely centers on the character of a veteran’s service.

VA Loan Military Service Requirements for Veterans and Active Duty

Veterans

For veterans, eligibility hinges upon both when you served and how you served. Depending on your particular dates of service, you will qualify for VA home loan eligibility if you meet your respective military service requirements outlined below:

Between September 16, 1940 and July 25, 1947 (WWII):

• 90 total days, or
• Less than 90 days if you were discharged for a service-connected disability

Between July 26, 1947 and June 26, 1950 (post-WWII period):

• 181 continuous days, or
• Less than 181 days if you were discharged for a service-connected disability

Between June 27, 1950 and January 31, 1955 (Korean War):

• 90 total days, or
• Less than 90 days if you were discharged for a service-connected disability

Between February 1, 1955 and August 4, 1964 (post-Korean War period):

• 181 continuous days, or
• Less than 181 days if you were discharged for a service-connected disability

Between August 5, 1964 and May 7, 1975 (Vietnam War), or February 28, 1961 to May 7, 1975, if you served in the Republic of Vietnam:

• 90 total days, or
• Less than 90 days if you were discharged for a service-connected disability

Between May 8, 1975 and September 7, 1980 (post-Vietnam War period), or Between May 8, 1975 and October 16, 1981, if you served as an officer:

• 181 continuous days, or
• Less than 181 days if you were discharged for a service-connected disability

Between September 8, 1980 and August 1, 1990, or Between October 17, 1981 and August 1, 1990, if you served as an officer:

• 24 continuous months, or
• The full period (at least 181 days) for which you were called to active duty

Between August 2, 1990 and the present (Gulf War):

• 24 continuous months, or
• The full period (at least 90 days) for which you were called or ordered to active duty, or
• At least 90 days if you were discharged for a hardship, a reduction in force, or for convenience of the government, or
• Less than 90 days if you were discharged for a service-connected disability

You separated from service after September 7, 1980, or After October 16, 1981, if you served as an officer:

• 24 continuous months, or
• The full period (at least 181 days) for which you were called or ordered to active duty, or
• At least 181 days if you were discharged for a hardship, a reduction in force, or for convenience of the government, or
• Less than 181 days if you were discharged for a service-connected disability

Active Duty

For active duty troops, VA loan eligibility proves far easier to determine. If you’re currently on active duty, you qualify for the home loan if you’ve served at least 90 days of continuous service. Most troops meet this threshold within the first few months of their first enlistment.

VA Loan Military Service Requirements for National Guard and Reserve

Both National Guard and Reserve members qualify for the VA loan if they meet one of the below military service requirements:

• Completed at least six years of honorable service, or
• Mobilized for active duty for a period of at least 90 days, or
• Received a discharge due to a service-connected disability

What if I Don’t Meet the Minimum Military Service Requirements for a VA Loan?

Generally speaking, to qualify for the VA home loan, you must meet one of the above requirements. However, exceptions to these minimum service requirements exist for certain service members. If you were discharged for one of the below reasons, you may still be able to receive a VA loan COE:

• Hardship, or
• The convenience of the government (you must have served at least 20 months of a 2-year enlistment), or
• Early out (you must have served 21 months of a 2-year enlistment), or
• Reduction in force, or
• Certain medical conditions, or
• A service-connected disability (a disability related to your military service)

If you believe you fall into one of the above categories, you can apply directly with the VA for a COE.

VA Loan and Discharge Status

Alternatively, some veterans may not qualify for the VA loan due to their discharge status, regardless of the fact that they otherwise met the minimum service requirements. More precisely, if you received an other-than-honorable, bad conduct, or dishonorable discharge, you may not be eligible for VA loans.

Fortunately, the VA offers these veterans two other options to qualify for a COE:

Option 1: Apply for a Discharge Upgrade

With this automated system, veterans can use the VA website to: “Answer a series of questions to get customized step-by-step instructions on how to apply for a discharge upgrade or correction. If your application goes through and your discharge is upgraded, you’ll be eligible for the VA benefits you earned during your period of service.”

Option 2: Apply for the VA Character of Discharge Review Process

Even when veterans don’t qualify for a discharge upgrade, they may be able to access VA benefits. According to VA guidance: “Even with a less than honorable discharge, you may be able to access some VA benefits through the Character of Discharge review process. When you apply for VA benefits, we’ll review your record to determine if your service was “honorable for VA purposes.” This review can take up to a year. Please provide us with documents supporting your case, similar to the evidence you’d send with an application to upgrade your discharge.”

Furthermore, the VA recommends that veterans may want: “to consider finding someone to advocate on your behalf, depending on the complexity of your case. A lawyer or Veterans Service Organization (VSO) can collect and submit supporting documents for you.”

Final Thoughts

The VA loan serves as one of the most significant financial benefits to service. But, to qualify, troops must meet certain minimum service requirements. If you don’t fall into one of the above categories but believe your military service justifies VA loan eligibility, contact your local VA Regional Loan Center for more information.

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Maurice “Chipp” Naylon spent nine years as an infantry officer in the Marine Corps. He is currently a licensed CPA specializing in real estate development and accounting.

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