Are you a Veteran and planning to purchase a home? The U.S. Department of Veteran Affairs (VA) can help you get a loan.  The VA wants to help veterans, and eligible surviving spouses become homeowners.  Since VA home Loans are provided by private lenders, by guaranteeing a portion of the loan, the VA enables these lenders to provide you with more favorable terms.  This means you save money in the long run.  Wonder if you qualify? Curious how to apply and what other benefits the VA can offer? We’re here to help!

VA Home Loan Guarantee

Remember that most VA Home Loans are handled entirely by private lenders and the VA rarely gets involved in the loan approval process. However the VA backs up the loan by guaranteeing a portion of it. This puts you in a good position as the borrower in that if something were to go wrong and you can’t make your mortgage payments the lending institution can come to the VA to cover any losses that might occur. The VA guarantee is “insurance” to your lender. The VA standing behind you, often time’s results in a lower interest rate, which means you pay less over time.  It also provides a safety net, in case you were to get in over your head.

There are a number of VA loans available to you as a service member including purchase loans, cash-out refinance home loans (where you can pull equity from your existing home), Interest Rate Reduction Refinance Loan (IRRRL), Native American Direct Loan (NADL), Adapted Housing Grants, and more! Let’s take a look at each one so you know which best suits your needs.

  • Purchase loans: Are there to help you purchase a home at a competitive interest rate, often without requiring a down payment or private mortgage insurance.
  • Cash-out Refinance Loans: Are for homeowners who want to withdraw cash from your home equity to take care of financial constraints like paying for school, making home improvements, or paying down debt. They can also be used to refinance a non-VA loan into a VA loan. VA will guarantee loans up to 100% of the value of your home.

Eligibility: You must have an acceptable credit score, sufficient income, and a valid Certificate of Eligibility (See Below) to obtain a VA guaranteed home loan. The home must be your own personal place of residence or occupancy.

  • Interest Rate Reduction Refinance Loan (IRRRL):  Lowers your interest rate by refinancing your existing VA home loan.  This will bring down your monthly mortgage payments you are also able to refinance an adjustable rate mortgage into a fixed rate mortgage.
  1. No appraisal or credit underwriting package is required when you apply.
  2. AN IRRL may be done with no money out of your pocket by including all costs in the new loan or by increasing the interest rate of the new loan to a high enough point to allow the lender to pay the costs.
  3. Refinancing from an existing VA adjustable rate mortgage to a fixed rate mortgage, the interest rate could rise, so be mindful of that.
  4. It does not have to be through a specific lender, any VA lender of your choosing may process your application for your IRRL
  5. Veterans are strongly urged to contact several lenders. Terms may vary and doing the research will save you money.
  6. You many not receive any cash from loan proceeds.

Eligibility: An IRRRL can only be made to refinance a property on which you have already used your VA loan eligibility. It must be a VA to VA refinance, and it will reuse the entitlement you originally possessed.

A COE is not required, but if you have one bring it with you to show the lender prior to use of your entitlement. No loan other than the existing VA loan may be paid for from the IRRL. If you have a second mortgage, the holder must agree to subordinate the lien so that your new VA loan will be your first mortgage. You may have used your entitlement when obtaining a VA loan when you originally purchased your home, or by substituting your eligibility for that of the seller if you assumed the loan. The occupancy requirement for an IRRL is different from other VA loans.  For an IRRL you need only certify that you previously occupied the home.

  • Native American Direct Loan (NADL): This program provides direct home loans from the VA to eligible Native American Veterans to finance the purchase, construction, or improvement of homes on Federal Trust Land.  This allows the refinancing of a prior NADL to reduce the interest rate. The interest rate for such loans is usually 3.75% but they are subject to change based on market fluctuations. NADL benefits include:
  1. No down payment, no private mortgage insurance and limited closing costs.
  2. $417,000 limit in most areas; some higher cost counties have higher loan limits so check your area if you believe you’ll need more to learn what the limit is.
  3. Low, fixed-rate 30-year mortgage with limited closing costs
  4. Re-usable benefit.

Eligibility: To obtain a NADL, as mandated by law, you must meet the following criteria.

To obtain a NADL, the law requires that:

  1. The Native American Veteran is eligible for VA home loan benefits and have available entitlement (go to this link for information on how to get a Certificate of Eligibility)
  2. The tribal government must have signed a Memorandum of Understanding (MOU) with the Secretary of Veterans Affairs. The MOU spells out the conditions under which the program will operate on its trust lands (see a sample MOU here)
  3. The loan must be to purchase, construct, or improve a home on Federally-recognized trust or allotted land.
  4. The Veteran must occupy the property as his or her home.
  5. The Veteran must be a satisfactory credit risk.
  6. The income of the Veteran and spouse, if any, must be shown to be stable and sufficient to meet the mortgage payments, cover the other costs of owning a home, take care of other obligations and expenses, and have enough left over for family support.
  7. All prospective applicants are encouraged to contact VA to determine if they are eligible for VA home loan benefits and to contact either their local housing authority or VA to find out if this program is right for them and to apply for a home loan.

Loan Fees: Native American Veterans must pay a funding fee of 1.25% to obtain VA’s direct loan to purchase a home.  The fee to refinance a prior VA-loan is .50%.  Borrowers have the option to finance the VA funding fee or pay it in cash, but the funding fee must be paid when you close on the home.  If you are a: Veteran receiving VA compensation for service-connected disability or a veteran who would be entitled to receive compensation for a service-connected disability if you do not receive retirement or active duty pay, or if you are the surviving spouse of a Veteran who died in service or from a service-connected disability than you do NOT have to pay the funding fee.

  • Housing Grants for Disabled Veterans: This is designed to provide grants to service members and veterans with certain permanent and total service-connected disabilities to help purchase, construct, or modify an adapted or existing home to accommodate a disability.  Two grant programs exist: the Specially Adapted Housing grant and the Special Housing Adaptation Grant.
  1. Specially Adapted Housing (SAH) Grant: designed to help Veterans with certain service-connected disabilities live independently in a barrier-free environment SAH grants can be used in one of the following ways.
  2. Construct a specially adapted home on land to be acquired
  3. Build a home on land already owned if it is suitable for specially adapted housing
  4. Remodel an existing home if it can be made suitable for specially adapted housing
  5. Apply the grant against the unpaid principal mortgage balance of an adapted home already acquired with the assistance of a VA grant.
  6. Special Housing Adaptation (SHA) Grant: This grant is geared towards helping veterans with service-connected disabilities to adapt or purchase a home to accommodate the disability.  They can be used in the following ways:
  7. Adapt an existing home the veteran or a family member already owns in which the veteran lives
  8. Adapt a home the veteran or family member intends to purchase in which the veteran will live.
  9. Help a veteran purchase a home already adapted in which the veteran will live.

            Eligibility: If you are a service member or veteran with a permanent and total service-connected disability, you may be entitled to a Specially Adapted Housing grant or a special housing adaptation grant.. See Below for requirements. (The Following Table was taken from the U.S. Department of Veteran Affairs)

Specially Adapted Housing (SAH) Grant

Eligibility Living Situation Ownership Number of Grants You Can Use
·       Loss of or loss of use of both legs, OR

·       Loss of or loss of use of both arms, OR

·       Blindness in both eyes having only light perception, plus loss of or loss of use of one leg, OR

·       The loss of or loss of use of one lower leg together with residuals of organic disease or injury, OR

·       The loss of or loss of use of one leg together with the loss of or loss of use of one arm, OR

·       Certain severe burns, OR

·       The loss, or loss of use of one or more lower extremeties due to service on or after September 11, 2001, which so affects the functions of balance or propulsion as to preclude ambulating without the aid of braces, crutches, canes, or a wheelchair

Permanent Home is owned by an eligible individual Maximum of 3 grants, up to the maximum dollar amount allowable

Special Housing Adaptation (SHA) Grant

Eligibility Living Situation Ownership Number of Grants You Can Use
·       Blindness in both eyes with 20/200 visual acuity or less, OR

·       Loss of or loss of use of both hands, OR

·       Certain severe burn injuries, OR

·       Certain severe respiratory injuries

Permanent Home is owned by an eligible individual or family member Maximum of 3 grants, up to the maximum dollar amount allowable

 

Certificate of Eligibility COE:

 

The Following table will show which evidence you submit to verify your eligibility for a VA Home loan and how to submit that evidence to obtain your certificate of eligibility.  Applying for your COE can be done online, through your lender, or by mail.  (The Following Table was taken from the U.S Veterans Affairs Website)

 

Category Evidence To Apply
Veteran DD Form 214 – required to have a copy showing the character of service (item 24) and the narrative reason for separation (item 28).
Current or former National Guard or Reserve member who has been activated Federal active service
Active Duty Servicemember A current statement of service:

·       signed by (or by the direction of):

·       the adjutant, personnel office, or commander of the unit or higher headquarters

·       showing:

·       Your full name

·       Social Security Number

·       Date of birth

·       Entry date on active duty

·       The duration of any lost time

·       The name of the command providing the information

Current National Guard or Reserve member who has never been Federal active service Statement of service:

·       signed by (or by the direction of):

·       the adjutant, personnel officer or commander of your unit or higher headquarters

·       showing:

·       Your full name

·       Social Security Number

·       Date of birth

·       Entry date on duty

·       The total number of creditable years of service

·       The duration of any lost time

·       The name of the command providing the information

Discharged member of the National Guard who hasnever been activated for Federal active service NGB Form 22, Report of Separation and Record of Service, for each period of National Guard service

-OR-

NGB Form 23, Retirement Points Accounting, and proof of the character of service

Discharged member of the Selected Reserve who has never been activated for Federal active service Copy of your latest annual retirement points statement and evidence of honorable service
If you are a Surviving Spouse in Receipt of DIC (Dependency & Indemnity Compensation) benefits Submit VA form 26-1817 and veteran’s DD214 ( if available)

Include veteran’s and surviving spouse’s social security number on the 26-1817 form

If you are a Surviving Spouse and are not receiving DIC (Dependency & Indemnity Compensation) benefits Submit the following to the appropriate Compensation and Pension office:

VA form 21-534

– DD214 (if available)

– Marriage License

– Death Certificate or DD Form 1300 – Report of Casualty

– Please find the mailing address for your state to send the VA 21-534 on the following link. PMC States

 

VA Funding Fees

Most if not all, veterans using the VA Home Loan Guaranty benefit must pay a funding fee.  This reduces the expense of the loan to the taxpayers, as a result of the policy that VA loans do not require a down payment and has no monthly mortgage insurance. This will vary based on your loan and your military category, the presence of a down payment, as well as if you are a first-time or subsequent loan user. You can finance the fee or pay it in cash, but funding fee must be paid at closing time. If you are a: Veteran receiving VA compensation for service-connected disability or a veteran who would be entitled to receive compensation for a service-connected disability if you do not receive retirement or active duty pay, or if you are the surviving spouse of a Veteran who died in service or from a service-connected disability than you do NOT have to pay the funding fee.

 

The VA offers a lot of opportunity for the prospective and current home owner. Having the VA stand behind you when getting a loan can save you money in the long run.  VA loans offer additional security that take stress away from a time rampant with it and provides peace of mind.  Remember to look at VA loans the next time you’re in need of a helping hand.