What Is a General Discharge & Why Did That Prevent a VA Loan?

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How you leave the military affects your eligibility for benefits.
How you leave the military affects your eligibility for benefits. (Image: Jupiterimages/Creatas/Getty Images)

The United States Department of Veterans Affairs does not issue funds in a VA loan. The agency guarantees the loan, issued by a VA approved lender. Those who qualify for a VA loan include veterans, and the unmarried widows and widowers of veterans whose deaths resulted from active duty, or spouses of those missing in action. If the veteran received a general discharge, he may not qualify under the program.

Separated vs. Discharged

After completing the initial enlistment in the military, the service person is discharged or separated. A discharge alleviates the service person of future military obligation. When separated, it is possible for the military person to have an additional military obligation via the Individual Ready Reserve.

Types of Discharge

The types of discharge include honorable, general, other than honorable (OTH), bad conduct discharge (BCD) and dishonorable discharge (DD). The honorable discharge is the highest, most respected form of discharge. For an honorable discharge, the service person must have a good to excellent rating. In some instances, a service person receiving a lesser discharge can be granted an honorable discharge should they display extraordinary achievement after the service.

General Discharge

While those receiving a general discharge performed satisfactory, something about their conduct or performance does not meet the standards set by the military. When released under a general discharge the commander discloses in writing the reasons for the general discharge. The discharged service person has a right to seek council and must sign a document acknowledging the fact a general discharge has the potential to cause prejudice in civilian life. Prior to the appeal of the “Don’t Ask Don’t Tell,” some charged with homosexual conduct faced general discharge.

Subject to Review

VA loan eligibility for a service person released on a general discharge is subject to review. According to information posted on the United States Department of Veterans affairs website, “Applications involving other than honorable discharges will usually require further development by VA. This is necessary to determine if the service was under other than dishonorable conditions.”

VA Loan

Even if the applicant is eligible for a VA loan, the borrower must still meet other requirements of the private lender, such as submitting to credit review and verification of employment or the ability to repay the loan. The VA loan works in a similar way to private mortgage insurance, allowing the borrower to obtain a loan with a lower down payment.

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