What VA Home Loan borrowers need to know – Part 2

By Larry Dandridge

Created by the Servicemen’s Readjustment Act of 1944, the VA-Guaranteed Home Loan program has helped generations of veterans, military members, and their families enjoy the dream of home ownership and the opportunity to retain their homes during temporary financial hardship.

If you have any questions about the VA Home Loan benefit or issues with your current home loan, contact the VA at 1-877-827-3702.

To learn more about VA home loans, veterans, service members, and their survivors should read the information at:

• VA “Home Loan Guaranty Buyer’s Guide” at https://bit.ly/3B2o0hm.
• VA webpage “VA Housing Assistance” https://bit.ly/4gqOWHI.
• VA webpage “Buying a Home with a VA-Backed Loan (Step by step instructions)” https://bit.ly/3MQzze5.
• VA webpage “VA-Backed Veterans Home Loans” https://bit.ly/3fcQqKm.
• The VA webpage “Eligibility for VA Home Loan Programs” https://bit.ly/3LCYrFw.
• VA webpage “How to Request a VA Home Loan COE” https://bit.ly/3LCYrFw.
• VA webpage “Request a VA Home Loan Certificate of Eligibility (COE)” https://bit.ly/3MOcfgU.
• VA webpage “VA Home Loan Programs for Surviving Spouses” https://bit.ly/3zmUToe.
• VA webpage “VA Help to Avoid Foreclosure” https://bit.ly/3XpJ60B.
• VA News “VA and Consumer Financial Protection Bureau Warn Against Home Loan Refinancing Offers that Sound too Good to be True” https://bit.ly/3KbvgJO.
• VA webpage “VA Funding Fee and Laon Closing Costs” https://bit.ly/3CgHg8a.
• VA webpage “VA Home Loan Limits” https://bit.ly/3XrOZKK.

• VA webpage titled “VA Home Loans Appraisers/Staff Appraisal Reviewer” https://bit.ly/4ehgRrM.
• VA webpage, titled “VA Home Loans Lenders Page,” https://bit.ly/4d3xfLn.
• VA webpage titled “Real Estate Professionals VA Home Loan Tool Kit” https://bit.ly/4d3mvMS.
• VA webpage “Servicers of VA Loans” https://bit.ly/3TqoeF7.
• VA News Story https://bit.ly/4gmG45E.
• VA webpage “VA Loans (Find VA Acquired Properties) – Property Management Service Contract” https://bit.ly/4dhnh9u.
• VA information for Veteran Borrowers, Mortgage Lenders, and Mortgage Servicers on “VA Guidance on Natural Disasters” https://bit.ly/3TvUAhZ.
• How to get VA Housing Assistance, some things you need to know (Article 1 of 3), May 11, 2022, https://bit.ly/3MXCwcc.
• How to get VA Housing Assistance, some things you need to know (Article 2 of 3), May 18, 2022, https://bit.ly/3Tmu7mR.
• How to get VA Housing Assistance, some things you need to know (Article 3 of 3), May 25, 2022, https://bit.ly/3ZfUMFL.

The following information and question answers come from the VA Home Loan Guaranty Buyer’s Guide.

What is the VA Home Loan ‘Guaranty?’

The VA home loan guarantee is an agreement that the VA will reimburse a lender (such as banks, credit unions, mortgage companies, etc.) in the event of loss due to foreclosure. This guarantee takes the place of your down payment.

Who is eligible for a VA Home Loan?

Active duty servicemembers and veterans with discharges other than dishonorable, National Guard and Reserve service members and Veterans with an honorable discharge, certain eligible spouses, and other uniformed service personnel may be eligible for VA home loan guaranty benefits. The full listing is available online at https://bit.ly/3LCYrFw.

Is there a fee for using the VA Home Loan Guaranty? 

Yes, but the funding fee can be waived. To keep the program viable, Congress instituted a program funding fee, which is a percentage of the total loan amount. This user fee varies based on whether the loan is a first-time or subsequent (second, third, etc.) use of the benefit. The funding fee may be paid in cash or included in the loan at closing. The seller, lender, or any other party on your behalf can also pay the funding fee. (See Chapter 8 of the Lenders Handbook for more information). The following individuals do not pay the VA funding fee:

• Veterans receiving VA compensation for a service-connected disability.
• Veterans entitled to receive VA compensation for a service-connected disability, but receive retirement pay or active service pay.
• Un-remarried surviving spouses of Veterans who died in active service or from a service-connected disability.
• Service member with a proposed or memorandum rating from VA, before loan closing, as eligible to receive compensation due to a pre-discharge claim.
• Service member on active duty who provides evidence of having been awarded the Purple Heart on or before the date of loan closing.

Is there a limit to the size of a VA-backed mortgage?

No loan limits exist if one has full home loan benefits or full entitlement. If you are a first-time homebuyer or have sold your previous VA-backed home and paid your loan in full, you can enjoy VA [1] backing on a home loan regardless of home price and without needing a down payment. Of course, you must be able to afford the home, and the property must be appraised for at least the purchase price; otherwise, you may have to make a small down payment. For loans made before 2020 that exceeded the Freddie Mac conforming loan limit, lenders required borrowers to pay a down payment for the loan amount above the county loan limit.

What if a veteran, service member, or survivor wants to buy a home while still having another VA Home Loan?

While you can buy a home for any loan amount, you must either sell your previous home or understand VA rules on subsequent purchases and remaining entitlement. Those who purchase a subsequent home without selling their previous VA-guaranteed home will continue to follow their county-conforming loan limit for the VA loan guaranty. 

This may mean a down payment on any amount above the loan limit. You must be able to afford all your VA loans simultaneously, and the subsequent home must become your residence. See Appendix D of the VA Home Loan Guaranty Buyer’s Guide for more information.

What do you need to know and do when buying a home with a VA Home Loan?

1. Verify your veteran or survivor VA Home Loan eligibility.
2. Learn about the basics of home buying “before” you shop.
3. Apply for a VA loan Certificate of Eligibility (COE) or through your lender.
4. Know the additional options for VA home loans.
5. Gather the required documents to provide them to your lender.
6. Learn about VA appraisal and VA Escape Clause.
7. Learn about things you need to know after you close your loan.

The VA Home Loan Guaranty Buyer’s Guide provides detailed answers to the above seven need-to-know questions/actions.

Continued next week.

Larry Dandridge is a Vietnam War wounded warrior, disabled veteran, ex-Enlisted Infantryman, ex-Warrant Officer Pilot, and retired Lt. Colonel. He is a past Veterans Service Officer, a Patient Adviser at the RHJ VA Hospital, the Fisher House Charleston Good Will Ambassador, and the VP for Veteran Affairs for the local Army Association Chapter. Larry is the author of the award-winning book Blades of Thunder and a contributing free-lance writer with the Island News. Contact him at LDandridge@earthlink.net or 843-276-7164.