Qualifications for Military Home Loans

By Jamie Kim

In 1944, President Franklin D. Roosevelt signed the GI Bill. Over time, it became known as the Veterans Administration Loan or VA Loan. This loan offered many U.S. military veterans and their families a chance at home ownership they might not otherwise have enjoyed, by allowing them to purchase homes with no down payment. Since the loans are federally funded, private lenders are repaid the loan amount if the veteran-borrower defaults on the mortgage.

Originally, in order to qualify for a VA loan, a veteran was required to have served at least 90 days of active duty in the U.S. military during wartime or 181 days during peacetime. Later, however, the statute was amended, requiring veterans who began their military service after September 7, 1980, to serve at least two years of active duty in order to become eligible. In addition, to qualify for a VA loan, the veteran must currently be an active serviceman or have been honorably discharged.

If you are or were a U.S. National Guard member or a military reservist in another branch of the armed services, you must have served for six years to become eligible. A spouse of a deceased veteran may also apply for a VA home loan if unmarried or older than 57.

The Veterans Administration will provide federal insurance up to 25 percent of the loan amount, not to exceed $417,000. In other words, the federal government will provide private lenders with a maximum guarantee of $417,000 if the veteran defaults on the loan.

VA Loans still go through the traditional lending approval and underwriting process. The lender providing the loan will verify credit history and score, past debts, and source of current income.

VA Loans are only extended to veterans that provide a Certificate of Eligibility or COE. In order to obtain the COE, a veteran must first complete "VA Form 26-1880" during the loan pre-qualification process. This form allows the Veterans Administration to verify the length of the borrower's military service.

Additionally, those currently serving on active duty must obtain a signed statement of service from a higher ranking officer, including total length of service and the date service began. Honorably discharged veterans must obtain DD Form 214-Certificate of Release or Discharge from Active Duty and submit a copy of that form.

If the veteran was in the National Guard or Reserves, then documentation proving six years of service with honorable discharge must be provided. Otherwise, current active Reservists and Guardsmen must obtain signatures from higher-ranking officers.

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