6 STEPS IN ARRANGING A VETERAN’S GUARANTEED LOAN
1. Find the property suitable for your needs.
2. Go to a lender and apply for the loan.
3. Present your discharge or separation papers relating to latest period of service and/or a
Certificate of Eligibility.
4. Property is appraised by approved appraiser.
5. Estimate of property's reasonable value is determined.
6. If application is approved, you get the loan.
WHAT VA CAN DO
VA loans offer the following important features:
Ensure that all veterans are given an equal opportunity to buy homes with VA assistance,
without regard to their race, color, religion, sex, handicap, familial status, or national origin;
No downpayment (unless required by the lender, the purchase price is more than the
reasonable value of the property as determined by VA, or the loan is made with graduated
A freely negotiable fixed interest rate competitive with conventional mortgage interest rates;
The buyer is informed of the estimated reasonable value of the property;
• Limitations on closing costs;
An assumable mortgage. However, for loans closed on or after March 1, 1988, the
assumption must be approved in advance by the lender or VA. Generally, this involves a
review of the creditworthiness of the purchaser (ability and willingness to make the mortgage
payments). Be sure to see section entitled "Loan Repayment Terms";
Long amortization (repayment) terms;
Right to prepay without penalty (lenders may require that any partial prepayments be in the
amount of at least 1 monthly installment of principal or $100, whichever is less);
For houses inspected by VA during construction, a warranty from the builder and VA
assistance in trying to obtain the builder's cooperation in correcting any justified construction
Forbearance extended to VA homeowners experiencing temporary financial difficulty.
WHAT VA CANNOT DO
GUARANTEE THAT THE HOUSE YOU BUY, WHETHER IT IS NEW OR PREVIOUSLY
OCCUPIED, WILL BE FREE OF DEFECTS. The VA appraisal is NOT intended to be an
"inspection" of the property. It is in your best interest to seek expert advice BEFORE you
legally commit yourself in a purchase agreement, particularly if you have any doubts about
the condition of the house. Most sellers will permit you, at your expense, to arrange for an
inspection by a qualified residential inspection service and negotiate with you concerning
repairs to be included in the purchase agreement. Such action can prevent later problems,
disagreements and disappointments.
Remember, VA guarantees only the loan, NOT the condition of the property. It is your
responsibility to be an informed buyer and assure yourself that what you are buying is
satisfactory to you in all respects.
If you have a home built, VA cannot compel the builder to correct construction defects or
otherwise live up to the contract. VA authority is limited to suspension of the builder from
participation in the VA Loan Guaranty program.
VA cannot guarantee that you are making a good investment or that you can resell the house
at the price you paid.
VA does not have the authority to provide you with legal services.
REQUIREMENTS FOR VA LOAN APPROVAL
To get a VA loan the law requires that:
You must be an eligible veteran who has available home loan entitlement (except in the case
of an interest rate reduction refinancing loan--see "Interest Rates" below.
The loan must be for an eligible purpose. The purchase price should not exceed the
appraised value. Otherwise, you will have to pay the difference from your own resources;
You must occupy or intend to occupy the property as your home within a reasonable period of
time after closing the loan;
You must have enough income to meet the new mortgage payments on the loan, cover the
costs of owning a home, take care of other obligations and expenses, and still have enough
income left over for family support (a spouse's income is considered in the same manner as
the veteran's); and
• You must have a good credit record.
VA-guaranteed loans are made by private lenders such as banks, savings and loan associations,
or mortgage companies. To get a loan, you apply to the lender. If the loan is approved, VA
guarantees the loan when it is closed. The guaranty means the lender is protected against loss if
you or a later owner fail to repay the loan.
Questions and Answers
1. How much is the guaranty?
VA will guarantee up to 50 percent of a home loan up to $45,000. For loans between $45,000
and $144,000, the minimum guaranty amount is $22,500, with a maximum guaranty, of up to 40
percent of the loan up to $36,000, subject to the amount of entitlement a veteran has available.
For loans of more than $144,000 made for the purchase or construction of a home or to purchase
a residential unit in a condominium or to refinance an existing VA-guaranteed loan for interest
rate reduction, the maximum guaranty is the lesser of 25% or $104,250 which is 25% of the
Freddie Mac conforming loan limit for a single family residence for 2007. This figure will change
yearly. (For information about entitlement see "Service Eligibility" below.)
2. Is $36,000 the biggest loan a veteran can get?
No. You may generally borrow up to the reasonable value of the property or the purchase price,
whichever is less, plus the funding fee, if required. For certain refinancing loans, the maximum
loan is limited to 90 percent of the value of the property, plus the funding fee, if required. To
determine the reasonable value, VA requires an appraisal of the property. (Also see
"Downpayment Requirements" below.
3. What is the maximum VA loan?
There is no maximum VA loan, except that the loan cannot exceed the lesser of the appraised
value or purchase price, plus VA funding fee and energy efficient improvements, if applicable.
However, lenders usually won’t make a no-downpayment loan larger than $417,000 ($625,500 in
Alaska, Hawaii, Guam, and U.S. Virgin Islands) due to secondary market limitations.
4. Must the loan be repaid?
Yes. A VA guaranteed loan is not a gift. It must be repaid, just as you must repay any money
you borrow. The VA guaranty, which protects the lender against loss, encourages the lender to
make a loan with terms favorable to the veteran. But if you fail to make the payments you agreed
to make, you may lose your home through foreclosure, and you and your family would probably
lose all the time and money you had invested in it. If the lender does take a loss, VA must pay
the guaranty to the lender, and the amount paid by VA must be repaid by you. If your loan closed
on or after January 1,1990, you will owe the Government in the event of a default only if there
was fraud, misrepresentation, or bad faith on your part.
5. Does VA make any loan directly to eligible veterans?
Yes, but only to Native Americans on trust land or to supplement a grant to get a specially
adapted home for certain eligible veterans who have a permanent and total service-connected
disability(ies). For information concerning direct loans to Native American Veterans see VA
Pamphlet 26-93-1, which can be found on the internet at: http://www.benefits.va.gov/homeloans/vap26-
93-1.asp. See VA Pamphlet 26-69-1 for information concerning specially adapted housing
If the certificate cannot be issued by ACE, you can request it from VA, by completing VA Form 26-1880,
“Request for A Certificate of Eligibility.” The form should be submitted along with either
• received an involuntary discharge or release from active duty for the convenience of the
Government as a result of a reduction in force, or
Obtaining a Certificate of Eligibility
VA determines your eligibility and, if you are qualified, a Certificate of Eligibility will be issued.
ACE (automated certificate of eligibility): In some cases veterans can obtain the Certificate of
Eligibility from a lender. Most lenders have access to the ACE system. This Internet based
application can establish eligibility and issue an online Certificate of Eligibility in a matter of
seconds. Not all cases can be processed through ACE - only those for which VA has sufficient
data in our records. However, veterans are encouraged to ask their lenders about this method of
obtaining a certificate.
the originals or legible copies of your most recent discharge or separation papers covering active
military duty since September 16, 1940, which show active duty dates and type of discharge.
This form may be obtained from VA or at http://www.va.gov/vaforms/. If you were separated after
January 1, 1950, you must submit DD Form 214, Certificate of Release or Discharge From Active
In addition, if you are now on active duty and have not been previously discharged from active
duty service, you must submit a statement of service which includes the name of the issuing
authority (base or command), and is signed by or at the direction of an appropriate official. The
statement must include date of entry on active duty and the duration of any time lost.
Since there is no uniform document similar to the DD214 for proof of service in the Selected
Reserve, a number of different forms may be accepted as documentation of service in the
Selected Reserve. For those who served in the Army or Air National Guard and were discharged
after at least 6 years of such service, NGB Form 22 may be sufficient. Those who served in the
Army, Navy, Air Force, Marine Corps or Coast Guard Reserves may need to rely on any of a
variety of forms that document at least 6 years of honorable service. Often, it will be necessary to
submit a combination of documents such as an Honorable Discharge certificate together with a
retirement point’s statement. It is the reservist's responsibility to obtain and submit
documentation of 6 years of honorable service.
The Request for Certificate of Eligibility, VA Form 26-1880, should be mailed to the Atlanta
Regional Loan Center, ATTN: COE (262), P.O. Box 100034, Decature, GA 30031. The Eligibility
Center also maintains a toll free number (888-768-2132) for persons seeking information on
Questions and Answers
1. Does active duty for training in the Guard and Reserves qualify a person for home loan
No. Active duty for training in the Guard and Reserves does not qualify a person for home
loan benefits, unless the person completes a total of 6 years in the Guard and/or Reserves and
serves under title 10, U.S.C.
2. Does this kind of service provide entitlement to any other veterans' home loan benefit?
Yes. Active-duty-for-training service may qualify you for a HUD/FHA veterans' loan.
Under the National Housing Act loan program, the Federal Housing Administration of the
Department of Housing and Urban Development administers a loan program for veterans.
Financing under this program is available under slightly more favorable terms than those
available to nonveterans. VA's only role in this program is to determine the eligibility of the
veteran and, if qualified, issue a Certificate of Veteran Status as evidence of entitlement to
HUD/FHA loan benefits for veterans.
You may get a Certificate of Veteran Status by completing VA Form 26-8261a, Request for
Certificate of Veteran Status, and submitting it with the attachments listed in the instructions to VA
for a determination of eligibility. This form may be obtained from VA or at
All veterans discharged under other than dishonorable conditions from at least 90 days of service
which began before September 8, 1980, are eligible. Veterans of enlisted service in a regular
component of the Armed Forces, which began after September 7, 1980, or officers or reservists
who entered on active duty after October 13, 1982, must have served at least 24 months of
service or the full period for which called to active duty or Active Duty for Training before being
discharged, unless the discharge was for hardship or disability.