When You Can Use a VA-Backed Loan

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Before you can get a VA loan or a VA-backed loan through the Department of Veterans’ Affairs, you'll first apply for a Certificate of Eligibility (COE). You must have served a certain number of days, depending on when you served, and you must have an honorable discharge if you are a veteran. You can find in-depth VA eligibility requirements and complete a COE on the VA’s website.

Types of VA Loans

If you are a Native American veteran, you might be eligible for the Native American Direct Loan Program. The home must be an existing structure or a new build on Native American trust lands. You can use the loan to finance or re-finance. Additionally, your tribal organization has to be a part of the VA direct loan program. This is the only direct VA loan offered.

The Purchase Loans and Cash-Out Refinance Loans are guaranteed by the Department of Veterans’ Affairs. You get these loans from a lender who offers VA-backed loans. If you are active duty, your spouse or dependents may also be eligible. As with any other loan, you must meet income and credit standards.

The Interest Rate Reduction Refinance Loan is only available to those with a current VA-backed loan. If you are eligible for a lower interest rate, you can refinance with this type of loan to lower your interest rate.

Additionally, veterans who have total and permanent disabilities that are service-connected might be entitled to an Adapted Housing Grant. You can get money to add ramps and make other modifications to help you live on your own with a disability, or you can build a house that will allow you to live on your own because it is specially adapted to your disability.

How a VA-Guaranteed Loan Works

The Department of Veterans’ Affairs guarantees part of the loan that you get from a private lender. If you foreclose on the property, the government pays the lender for part of the loan you defaulted on. You can often get a VA-backed loan without a down payment because the VA guarantees the loan. In other cases, you might get a lower interest rate.

If a lender works with the VA to get you a loan, the lender must follow the VA’s standards for closing the loan. Standards might include a limit on how low your credit score can be. As with most loans, you will most likely have to get an appraisal before the loan closes.

Homes must also adhere to standards for inspections. If a home does not pass the VA’s inspection, you can either make the repairs or have the seller make the repairs. You will most likely have to have a second inspection to certify that the home now meets the VA’s standards.