Buying a home with a VA mortgage means financing a home purchase with no money down, relaxed credit guidelines and reduced closing fees. It’s without a doubt the most attractive home loan program available today for those needing a zero down loan but only for those who qualify. Who qualifies for a VA home loan?
The Obvious: The Veteran
Toward the end of World War II, Congress enacted and the President signed into law the Servicemen’s Readjustment Act of 1944, most often referred to at that time as the G.I. Bill. This law established a range of benefits to servicemen to help them acclimate to civilian life as well as providing financial aid to buy a farm, pay for college or start a business. And also to help buy a home with the brand new VA home loan program. It was a popular program that provided benefits to more than 2 million veterans who served in World War II.
Yet the program was only available to veterans who served in World War II and not for anyone who served during peace time.
In 1952, a new law was implemented that offered the same benefits to veterans of the Korean War as long as they served for at least 90 days during war time.
Later, the bill was adjusted once again in 1966 to include those who served in the armed forces during peace time as well as those who served during war time and now includes those who served during and after the Vietnam War, the Gulf War and finally all who served in the armed forces and retired with an honorable discharge with at least 90 days of active duty.
While the original G.I. Bill was designed for qualified veterans, today, active duty personnel may also qualify for the VA home loan benefit. Service members who are on regular duty with more than 180 days of consecutive service can qualify for a VA home loan and do not have to be a veteran.
Those who currently serve should be aware that a transfer is possible upon a reassignment and if they move from one base to another, if they bought a home using their VA benefit with no money down they can’t take their VA benefit with them.
When buying a home with a VA mortgage, when you move you either have to sell the home or rent it out. If you sell the home, you have the ability to recover your VA home loan entitlement if your buyers provided their own financing. Yet if you didn’t sell the home and rented it out, your VA home loan benefit is tied up in the original house and you can’t use a VA home loan until the original VA loan has been retired in some fashion.
Selling a home requires closing costs and if your position means it’s likely you’ll be transferred more than once over the next few years, a zero down VA loan may not be your best choice.
National Guard and Armed Forces Reserves
Those who serve or have served in the National Guard or Reserves may also qualify for the VA home loan benefit. To be eligible, the borrower must have:
- Completed at least 90 days of active service under Title 10 or Title 32, or
- Completed six years of service in an active unit, and
- Honorably discharged from the Guard or Reserves or Active Duty
Although there are more than 500,000 active duty reservists and Guard members at any one time, there are relatively few that take advantage of the home loan benefit and most aren’t aware they qualify for the zero down VA mortgage program.
While a spouse can enjoy the VA benefits bestowed on their spouse, VA home loan benefits can be transferred to a spouse only under specific situations and only after the qualifying veteran has died.
The surviving spouse may qualify for the VA home loan benefit as long as the qualifying VA borrower died from a service related injury or has been declared missing in action or a prisoner of war. As long as the surviving spouse does not remarry during specific periods, the VA home loan benefit can transfer.
Others may also qualify for the VA home loan benefit includes those who are cadets at the United States Military, Coast Guard or Air Force. Midshipmen at the Naval Academy and National Oceanic and Atmospheric Administration (NOAA) may also qualify for the VA home loan benefit.
Still Not Sure?
There are obvious beneficiaries of the VA home loan benefit and some that are not so obvious. If you think you might qualify for the VA home loan entitlement, the best thing you can do is to talk to a lender and ask - we'll put you in touch with up to five lenders for rate quotes and answers to your questions. Remember, the program is too valuable to be ignored!