Purchasing a home can be an exciting and sometimes challenging experience. Having additional resources is important when applying for and completing home loans. Eligible active-duty servicemembers and Veterans have an option to use a VA Home Loan, which offers flexibility and security when applying for a mortgage.
VA Loans aren’t limited to a one-time use — in fact, there’s no limit to the number of VA Loans you can take out throughout your lifetime, as long as you meet the eligibility requirements and can qualify with a lender. You can even have multiple loans at once. However, there is a limit on the amount the VA guarantees to pay back to your lender if you default on your loan and your VA entitlement may change which influences how much you may be able to borrow.
VA Loan Eligibility
Given the value of the benefit of the VA Loan and its benefit guarantee, the first question you should consider is whether you are eligible for the VA Loan.
To qualify for this loan, a borrower must meet one of the following requirements:
- Served 90 consecutive days of active service during wartime.
- Served 181 days of active service during peacetime.
- Served 6 years of service in the National Guard or Reserves.
- Be a surviving spouse of a servicemember who died in the line of duty or because of a service-related disability.
If you are a Veteran or military servicemember and have an existing VA Home Loan that you are looking to refinance, you can access it through the VA Cash-out Refinance loan, which gives you the ability to access the equity in your home. The VA Interest Rate Reduction Refinancing Loan (IRRRL) allows borrowers to take advantage of lower interest rates or revised mortgage terms.
VA Home Loan Limits
Those who are eligible and have full entitlement usually don’t have a limit on home loans over $144,000, which means you may not have to make a down payment. However, it may depend on the lender you are using, and conforming loan limit guidelines. For VA Home Loans, most lenders will follow the maximum conforming loan limits set by the Government Sponsored Enterprises or “GSEs” which are Fannie Mae and Freddie Mac. These maximum conforming loan limits, usually announced annually, can be accessed on the FHFA.gov website - the Federal Housing Finance Agency (FHFA) is the government agency that regulates the GSEs. Some counties may be considered a high-cost market area and allow for a higher home loan limit.
Full Entitlement Requirements
You have full entitlement if you meet one of the following criteria:
- You have never used your VA Loan benefit.
- You have paid your previous VA Loan in full and sold the property.
- You used your VA Loan benefit, but had a foreclosure or compromise claim and repaid the loan in full.
You can also use your remaining entitlement on its own or together with a down payment to take out an additional VA Loan.
Refunding Your VA Benefits
Even if you have previously applied for and secured a VA Loan, you can refund your VA benefits by restoring your previously used VA entitlement.
If you are selling a property financed through a VA Loan, it is important to sell the home for the full VA Loan balance. If you must sell it for less, you need lender approval and will lose the entitlement that you used to purchase the property.
The VA Loan program was intended to help Veterans and servicemembers purchase primary residences to live in. However, there are refinance options available for VA Loans, such as a VA Cash-out Refinance and a VA IRRRL, also known as a VA Streamline Refinance. By refinancing with either product, you are able to re-use your VA Loan benefits. However, the VA Funding Fees on the refinance loan may differ from the funding fees you paid on the mortgage used to buy your home.
The final restoration option occurs when another qualified Veteran or servicemember assumes your VA Loan by using their own VA Loan benefits.
AMS Will Help You Make the Most of Your VA Loan Benefits
If you are interested in a VA Home Loan, restoring your VA Loan benefits, or are looking for additional mortgage options, please reach out to one of our Military Mortgage Advisors at AAFMAA’s Mortgage Services (AMS).
We can help you find the mortgage that best meets your needs with our mortgage assessment. Contact us online or by phone today at (855) 929-3977 to learn more.