The VA loan entitlement program, originally passed in 1944 as the Servicemen’s Readjustment Act, was intended to help returning service members obtain a mortgage to purchase a home. It has expanded to include a wider range of veterans, including National Guard members and Reservists.
VA Loan Entitlement
VA loans are not made by the federal government. Rather, the government guarantees a financial institution that a specific amount of the loan will be repaid if the loan goes into default. As with any mortgage, it’s prudent to shop for the best rates and terms.
The applicant may opt out of paying points and other closing costs on a VA loan but this must be negotiated with the buyer, the seller, and the lender. Although applicants may be required to pay a funding fee, they will have the option of including this in the loan if they prefer. Some veterans will not have to pay a funding fee if they:
- Have a service-connected disability and are receiving a stipend for it.
- Have a service-connected disability but are active duty or retired.
- Are a surviving spouse.
- Currently, those who have served from WWII to the present are eligible for a VA loan entitlement. Service need not have been in a war zone but there are minimum length-of-service requirements and the discharge must have been other than dishonorable.
- Surviving spouses who have not remarried are eligible if the veteran was killed in action or died from injuries sustained in service.
- Surviving spouses over 57 years old can be remarried.
- Surviving spouses of 100 percent disabled veterans can be eligible.
- Veterans or surviving spouses must have credit and income sufficient to qualify for the loan.
- The VA loan must be for a primary residence, not a rental or second home.
How to Determine Eligibility
To apply for a VA loan, the applicant will need a Certificate of Eligibility, or COE, from the Department of Veterans Affairs. This can be done online or through the lender. The veteran or applicant will need a copy of the DD-214 for both online and in-person requests. Additional information may be required for surviving spouses, and specifics can be obtained at the Department of Veterans Affairs website.
Reusing VA Entitlement
Under certain circumstances, a veteran’s VA loan entitlement can be used more than once. To do this, the first VA loan must have been paid in full. Borrowers can apply to use their eligibility to purchase another home as long as the first loan was satisfied and the borrower intends to use the new home as a primary residence.
Veterans or surviving spouses who didn’t use their entire entitlement and have a balance remaining can use that balance on another home.
If the VA has no proof of the disposition of a home, they may not allow restoration of the entitlement even if they have proof that the previous loan was paid off.
Additional information on all of the above can be found at the Department of Veterans Affairs by clicking on the menu to the left.