Home Loan Guaranty
VA home loan guaranties are
issued to help eligible service members, veterans, reservists and unmarried surviving spouses obtain homes, condominiums,
residential cooperative housing units, and manufactured homes, and to refinance loans.
Loan Uses: A VA guaranty
helps protect lenders from loss if the borrower fails to repay the loan. It can be used to obtain a loan to:
1. Buy or build a home.
2. Buy
a residential condominium.
3. Buy a residential cooperative housing unit.
4. Repair, alter or improve a home.
5. Refinance an existing home
loan.
6. Buy
a manufactured home with or without a lot.
7. Buy and improve a manufactured
home lot.
8. Install a solar heating or cooling system or other weatherization improvements.
9. Buy a home and install energy-efficient
improvements.
Eligibility
In addition to the periods of eligibility and conditions of service requirements, applicants must have a good credit
rating, sufficient income, a valid Certificate of Eligibility (COE), and agree to live in the property in order to be approved
by a lender for a VA home loan.
To obtain a COE, complete VA Form 26-1880 -- “Request for a Certificate of
Eligibility for VA Home Loan” -- and mail to: VA Loan Eligibility Center, P.O. Box 20729, Winston-Salem, NC
27120.
It is also
possible to obtain a COE from your lender. Most lenders have access to VA’s “WebLGY”
system. This Internet-based application can establish eligibility and issue an online COE in seconds.
Not all cases can currently be processed online – only those for which VA has sufficient data in its records.
However, veterans are encouraged to ask their lenders about this method of obtaining a certificate before sending an
application to the Eligibility Center.
Periods of Eligibility
World
War II: (1) active duty service after Sept. 15, 1940, and prior to July 26,
1947; (2) discharge under other than dishonorable conditions; and (3) at least 90 days total service unless discharged early
for a service-connected disability.
Post-World War II period: (1) active duty service after July 25, 1947, and prior to June 27, 1950; (2) discharge under other than dishonorable
conditions; and (3) 181 days continuous active duty service unless discharged early for a service-connected disability.
Korean War: (1) active duty after June 26, 1950, and prior to Feb.
1, 1955; (2) discharge under other than dishonorable conditions; and (3) at least 90 days total service, unless discharged
early for a service-connected disability.
Post-Korean War period: (1) active
duty after Jan. 31, 1955, and prior to Aug. 5, 1964; (2) discharge under other than dishonorable conditions; (3) 181 days
continuous service, unless discharged early for a service-connected disability.
Vietnam War: (1) active duty after Aug. 4, 1964, and prior to May 8, 1975; (2) discharge under other than
dishonorable conditions; and (3) 90 days total service, unless discharged early for a service-connected disability. For veterans
who served in the Republic of Vietnam, the beginning date is Feb. 28, 1961.
Post-Vietnam period: (1) active duty after May 7, 1975, and prior to Aug. 2, 1990; (2) active duty for 181 continuous
days, all of which occurred after May 7, 1975; and (3) discharge under conditions other than dishonorable or early discharge
for service-connected disability.
24-Month Rule:
If service was between Sept. 8, 1980, (Oct. 16, 1981, for officers) and Aug. 1, 1990, veterans must generally complete 24
months of continuous active duty service or the full period (at least 181 days) for which they were called or ordered to active
duty, and be discharged under conditions other than dishonorable.
Exceptions are allowed if the veteran completed at least
181 days of active duty service but was discharged earlier than 24 months for (1) hardship, (2) the convenience of the government,
(3) reduction-in-force, (4) certain medical conditions, or (5) service-connected disability.
Gulf War: Veterans of the Gulf War era -- Aug. 2, 1990, to a date to be determined -- must generally complete
24 months of continuous active duty service or the full period (at least 90 days) for which they were called to active duty,
and be discharged under other than dishonorable conditions.
Exceptions are allowed if the veteran completed at
least 90 days of active duty but was discharged earlier than 24 months for (1) hardship, (2) the convenience of the government,
(3) reduction-in-force, (4) certain medical conditions, or (5) service-connected disability. Reservists and National Guard
members are eligible if they were activated after Aug. 1, 1990, served at least 90 days, and received an honorable discharge.
Active Duty Personnel: Until the Gulf War era is ended, persons on
active duty are eligible after serving 90 continuous days.
VA Guaranty Varies with Size and Type of Loan
The VA guaranty varies with the size of the loan, and is issued to protect lenders so they may
make loans to eligible borrowers. Because the lenders are able to obtain this guaranty from VA, borrowers do not need to make
a down payment, provided they have enough home loan entitlement.
The maximum guaranty amount is equal to 25 percent of the Freddie Mac conforming loan limit for
a single family home. This limit changes yearly, but is set at $417,000 for calendar year 2016 ($625,500 for Hawaii, Alaska,
Guam and the U.S. Virgin Islands).
The total loan amount may include
the Funding Fee, as well as up to $6,000 of home improvements to make the home more energy efficient.
An eligible
borrower who wishes to use a VA-guaranteed loan to refinance an existing mortgage generally can borrow up to 90 percent of
the home’s appraised value. However, a loan to reduce the interest rate on an existing VA-guaranteed loan may include
the entire outstanding balance of the prior loan, the costs of energy-efficient improvements, as well as closing costs, including
up to two discount points. An eligible borrower who wishes to obtain a VA-guaranteed loan to purchase a manufactured home
or lot can borrow up to 95 percent of the home’s purchase price.
