What is a VA Loan?
After the end of World War II, President Roosevelt felt the need to provide returning service men and women with assistance in transitioning between “war life” and “home life.” In 1944, The Department of Veterans Affairs was created to help provide stability and assurance to veterans. The VA Loan program provided returning servicemen and women the opportunity to buy a home.
A VA Loan is a mortgage issued by approved lenders and guaranteed by the federal government. It allows eligible military service members and veterans to either refinance up to 100% of their home or purchase a new home with zero down. But what makes one eligible for a VA Loan?
The following are eligible to take part in the VA Loan program:
- Active duty personnel
- Reservists/National Guard members
- Some surviving spouses
However, there are specific requirements that must be met in order to obtain a loan. Most borrowers can qualify for a VA Loan with the following conditions:
- Active Duty / Veterans with more than 90 consecutive days of service during war time (181 days during peace time)
- National Guard or the Reserves may qualify if they have served more than six years.
- Spouses of service members who died in the line of duty or who died from a service-related disability may also be eligible.
Why Should You Choose a VA Loan?
A VA Loan is an exclusive benefit you’ve earned through your service in the military. In fact, the VA Loan is considered one of the most advantageous loans available today. Not only do the benefits include the ability for you to buy a home with zero down, but you can also refinance up to 100% of your existing home’s value. Private mortgage insurance is not required, and you have the ability to qualify with less-than-perfect credit.
Getting a VA Loan is easier than you think. To prove you are eligible for a VA Loan, you will need to obtain your Certificate of Eligibility, which you can get through the VA by filling out Form 26-1880. Your lender will also need your permission to pull your credit to get your credit score. This step helps to assess your financial situation and determines your loan amount.
Another benefit that service members receive for their service is a Basic Allowance for Housing. Most active duty service members know that the BAH can be used to help in a rental situation, but many don’t realize that the BAH can be used to help purchase a home as well. The BAH will help you qualify for a VA Loan by acting as a secure, measurable proof of income. This means, you can use the BAH to pay some – or all – of your entire monthly mortgage cost. However, it’s important to note that BAH rates depend on your pay grade, location and number of dependents.
VA Loans for Spouses
It’s a fact of military life that service members will inevitably miss some pretty important life events. So a lot of the load has to be handled by the spouse. If you’re in the process of getting a VA Loan but have to leave due to assignment or deployment, there are some important facts that your spouse should know to help make the process easy and stress free.
Your spouse must receive Power of Attorney (POA). A POA is authorization for someone to act on another person’s behalf in legal or business matters. This POA can help the spouse make decisions and sign important paperwork without having to wait, while also protecting the veteran who is unable to be there.
The Department of Veterans Affairs understands the need for military service members to use spouses as POAs in the VA Loan process. However, all acting POAs should be sure to keep any copies of correspondence and documentation regarding the VA Loan process.
The POA can verify the veteran’s intent for the VA home loan entitlement to be used for the purchase or refinance of a home, can apply for a Certificate of Eligibility and initiate the processing of a loan.
It’s very important to note in order for the POA to close the VA Loan, the VA requires a veteran’s written permission regarding the transaction. This requirement can be satisfied by:
- The veteran’s signature on both the purchase agreement and the VA Loan application
- The POA signed by the veteran specifically calls out the entitlement, purpose, property identification, price and terms, and occupancy.
In some cases, other written verification may be needed to confirm the veteran’s military status and whether they are living or on active duty at the time of the VA Loan closing.
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