Fearing that they may be ineligible, many veterans may be missing their opportunity to secure a VA-guaranteed home loan, according to the United States Department of Veterans Affairs. The Veteran's Administration (VA) has established general requirements for the VA loan that enable most active duty or honorably discharged service personnel to participate in the home financing program. Surviving spouses of armed forces members killed in the line of duty may also be eligible for a VA mortgage.
VA loans can be used to buy a single-family home or condominium, to make repairs or improvements on an existing property, or to refinance an existing mortgage. The loans are designed to finance over 80 percent of the purchase price or appraised value.
Certificates of eligibility (COEs) are available to service personnel who have accrued 181 days of peacetime active duty, 90 days of wartime active duty, or National Guard/Reserves service for six years. The easiest way for home buyers to get one is to have their VA-approved mortgage lender order it online through a special lender portal. Applicants can also order their own certificates. After verifying service records, the VA can process a certificate of eligibility (COE) straight away for qualified applicants. The process can be completed entirely online at the VA. Applicants can also file VA Form 26-1880 to obtain proof of certification for lenders. In some cases, applicants may be required to produce their DD-214 form, certifying their honorable discharge.
Restoring or Extending Eligibility
VA loan recipients can only hold one VA loan at a time, but veterans who sell off their homes and repay the mortgage can get a new loan for their next property. On a one-time basis, borrowers who have paid off the mortgage and still own their home can receive eligibility for a second loan.
To update their eligibility, vets must submit a completed VA Form 26-1880 and paperwork showing that the first loan was repaid in full and, if terms apply, that the property was sold. Possible documentation can include a photocopy of the HUD-1 settlement statement showing sale of the property to pay off the mortgage or a formal letter from the first lender indicating that the mortgage was paid in full.
Borrowers can restore eligibility if they transfer an existing VA mortgage to a qualified assumer who also is an eligible veteran. If the assumer is not VA-eligible, the original borrower must wait until the mortgage is paid in full before being able to take on a new VA loan. In some cases, lenders will accept unused partial eligibility if the remaining eligibility covers the new loan amount. They may require a down payment, however.
If the spouse of an approved veteran gains the property through a divorce settlement, the service veteran cannot restore eligibility until the divorced spouse pays off the VA mortgage or substitutes his or her own eligibility (if applicable).