VA Loans for Recently Separated Veterans
Separating from the military is a monumental time for any veteran. They’ve spent the past several years or decades of their life making great sacrifices and putting their desires and dreams behind the needs of their country. Some veterans leave the military through retirement after many years of service, some leave for medical reasons, or some because they’ve completed their enlistment and want to enter the civilian workforce. Many veterans want to buy a house and establish roots in one location for their family, but aren’t sure how to use their VA entitlement. Here are some things every recently separated veterans should know about VA loans.
VA Loan Eligibility:
In general you’re eligible for a VA loan if:
- You’ve served 90 consecutive days active duty during wartime.
- You’ve served 181 consecutive days active duty during peace time.
- You’ve served 6 years in the National Guard or Reserves.
In order to prove prior military service veterans will need to provide the DD-214 form, the Certificate of Release or Discharge from Active Duty. This form will prove your military service and show your discharge date. The VA will be able to determine your eligibility with this form.
How Your Discharge Affects Your Loan:
Your discharge from the military can have an effect on your VA loan eligibility. The following three discharges are automatically acceptable for the VA: Honorable (HON), Under Honorable Conditions (UHC), and General (GEN).
The VA requires an adjunction review if you’ve had the following two types of discharges, Other Than Honorable (OTH), or Bad Conduct. Due to the unique circumstances that each veteran has with these types of discharges the VA may take several months to review and determine eligibility. Veterans with these types of discharges will need to factor this into their home buying timeline and potentially have other mortgage financing options as backup.
Any veterans with a dishonorable discharge will not be eligible to use the VA Home Loan Guaranty program.
If you have any further questions regarding your discharge and VA loan eligibility, read here the Character of Discharge official statement from the Department of Veteran’s Affairs.
Using GI Bill Assistance as Income
Many veterans leave the military and begin using their GI Bill to attend school. The Post 9/11 GI Bill provides money for tuition & books, and the veteran also receives a housing allowance each month. Depending on the location where the veteran is attending school, this housing allowance can be a couple thousand dollars.
Most veterans want to use the Post 9/11 GI Bill Assistance as income on their mortgage application. Lenders, however, will not use this as acceptable income. Their reasoning is that it is only temporary and can stop coming in at any time. The Post 9/11 GI Bill has a maximum time frame of 36 months. Most VA loans are for 30 or 15 years, much longer than the amount of time of the GI Bill Assistance. Furthermore, the veteran can choose at any time to stop attending school and they will stop receiving the GI Bill assistance. Lenders do not feel that this is stable enough income to qualify an applicant for a long term mortgage.
These are some of the unique situations that veterans can find themselves in while getting pre-approved for a VA loan. The VA understands the special circumstances that veterans can find themselves in and do their best to accommodate their needs.