VA Loan Rules


VA Loans, like FHA Loans, are often described incorrectly as government loans. Both are actually mortgage loans backed, not paid for, by government agencies, the United States Department of Veterans Affairs in the first case and the Federal Housing Authority in the second. Although both types of loans commonly help individuals who might not qualify for a non-guaranteed home loan, the rules for obtaining VA Loans are quite different.


VA Loans date back to 1944, when Franklin Delano Roosevelt was president. Alternatively called the GI Bill of Rights and the Servicemen's Readjustment Act then, the law was enacted to help veterans of the United States military purchase homes for their families with no down payment required. The loans have since enabled millions of military personnel to achieve the goal of home ownership who otherwise would not have due to financial issues.


Individual VA Loans guarantee up to 25% of a total home loan and are capped at $104,250, which means the maximum home loan that they apply to is $417,000. Eligible military veterans can still purchase a home that requires a higher loan, but then they will most likely have to make a down payment themselves to cover the excess amount.


The service requirements for VA Loans vary based on several factors, although an honorable discharge is a recurring precondition. Veterans of wars up to and including the Vietnam War must have served at least 90 days, while peacetime veterans must have served at least 181 continuous days if they were enlisted before September 7, 1980, or an officer before October 16, 1981.

If enlisted or an officer after those respective dates or a Gulf War veteran, the service requirements are generally two years of continuous active duty. Moreover, National Guard members and reservists have a six-year requirement, and spouses of deceased, missing-in-action, and prisoner-of-war veterans may also qualify in some circumstances.


Before applying for a VA Loan, interested veterans should contact the VA for a Certificate of Eligibility, which is a document that states the prospective home buyer is an honorably discharged veteran of the U.S. military. Sometimes veterans can obtain the certificate from their lender if the lender has access to the automated certificate of eligibility (ACE) system, an online database with information about military personnel.

Next, choose a home and sign a purchase contract with the seller or their agent acknowledging that an approved VA Loan is required. Then, consult a lender to finish the loan application, and once the loan and closing processes are complete, submit the appropriate loan documentation to the VA for guaranty.


Meeting the service requirements doesn't automatically guarantee a veteran will receive a VA Loan. Good credit and reliable income are other requirements. Additionally, since a VA Loan assures a lender won't lose the guaranteed amount if a veteran doesn't meet the loan obligations, loan recipients must still eventually repay the entire amount of the home loan; it's not free money.

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