If you are a former member of the U.S. military, you may have access to a loan under the VA Home Loan Guarantee program. The VA does not actually issue these loans but instead guarantees loans issued by private lenders. VA home loans provide more favorable interest rates and may allow you to buy a home for which you cannot make the down payment. VA loans may apply to situations beyond buying a home, moreover, such as making repairs or improvements. You can even use a VA loan to refinance an existing mortgage if you are struggling to keep up with payments.
You can apply for a VA loan online through the benefits website, or you can apply through the lender. The application will require submitting documentation of your discharge from the military, showing that you are eligible. The branch of the military in which you served will need to provide a statement of service.
Eligibility for VA Home Loans
To qualify for a VA home loan, you must have a Certificate of Eligibility, which may be an honorable discharge if you have it. If you do not have an honorable discharge, you will need to ask the VA for a Certificate of Eligibility. Someone pursuing a VA loan also must plan to live in the home, and they must have an adequate credit rating and income.
Eligibility for a VA home loan also is based on how long you served and when you served, although you do not need to meet the length of service requirement if you were discharged because of a disability related to your service. If you served for 90 days during World War II, the Korean War, or the Vietnam War, of which at least one day was during wartime, you will be eligible as long as your discharge was not dishonorable. If you served between 1945 and 1980 but did not serve in wartime, you need to have been on active duty for at least 181 days, and you must not have received a dishonorable discharge. If you served between September 7, 1980 and 1990, you need to have served for at least two years, or the full period in which you were called to active duty if it was at least 181 days. If you served in the Persian Gulf War, you must have completed your full period of active duty or have served for two years. If your full period of active duty lasted less than 90 days during the Persian Gulf War, you will not be eligible.
People who served in the National Guard and Reserves will be eligible if they served for at least six years and meet one of certain other criteria. These are getting an honorable discharge, continuing to serve in the Selected Reserve, getting transferred out of the Selected Reserve under honorable conditions, or getting placed on the retired list. You do not need to meet the length of service requirement if you were discharged because of a disability related to your service.
Limits and Fees for VA Home Loans
If you have good credit, you may be able to receive $100,000 to $150,000 in a VA-guaranteed loan. However, the loan minimum is $36,000. You should be aware that you may need to pay a funding fee related to the loan, unless you are getting disability benefits based on a disability related to your service. You still will need to pay a fee for getting the home appraised, as well as certain closing costs. The VA provides rules for the closing costs that a lender can charge.