VA Lenders Handbook (VA Pamphlet 26-7), Chapter 2, Topic 5 — Basic Eligibility Requirements

VA Pamphlet 26-7, Chapter 2 (Veteran’s Eligibility and Entitlement), Topic 5 — Basic Eligibility Requirements

Effective 2019-03-28 · VA Change Date for this topic

• This chapter has been revised in its entirety. a. General Rule for Eligibility A Veteran is eligible for VA home loan benefits if he or she served on active duty in the Army, Navy, Air Force, Marine Corps, or Coast Guard after September 15, 1940, and was discharged under conditions other than dishonorable after either: • 90 days or more, any part of which occurred during wartime, or • 181 continuous days or more (peacetime). b. 2-year Requirement A greater length of service is required for Veterans who: • enlisted (and service began) after September 7, 1980, or • entered service as an officer after October 16, 1981 These Veterans must have completed either: • 24-continuous months of active duty, or • the full period for which called or ordered to active duty, but not less than 90 days (any part during wartime) or 181 continuous days (peacetime). Cases involving other than honorable discharges will usually require further development by the VA Compensation Department. This is necessary to determine if the service was under other than dishonorable conditions. c. Wartime and Peacetime Refer to the Following Periods of Service Wartime Peacetime World War II 9/16/1940—7/25/1947 Post World War II period 7/26/1947—6/26/1950 Korean conflict 6/27/1950—1/31/1955 Post Korean period 2/1/1955—8/4/1964 Vietnam era 8/5/64—5/7/1975 (The Vietnam era begins 2/28/1961 for those individuals who served in the Republic of Vietnam.) Post Vietnam period 5/8/1975—8/1/1990 Persian Gulf War 8/2/1990—date to be determined d. Eligibility for Reserves and/or Guard Members of the Reserves and National Guard who are not otherwise eligible for loan guaranty benefits are eligible upon completion of 6 years of service in an active or drilling status in the Reserves or Guard (unless released earlier specifically for a service-connected disability). The applicant must have received an honorable character of discharge. A general or under honorable conditions discharge is not a qualifying or acceptable character of discharge. Service in the Individual Ready Reserve or Control Group (inactive status) is not qualifying length of service for the home loan program. e. Basic Eligibility Table The table below provides a quick reference to some of the most commonly eligible Veterans. This table is not exhaustive. A Veteran’s eligibility for home loan benefits may only be determined by VA. f. Eligibility of Spouses of Veterans Some spouses of Veterans may have home loan eligibility. They are the: • unmarried surviving spouse of a Veteran, who died as a result of service or service-connected causes, • surviving spouse of a Veteran who dies on active duty or from service-connected causes, who remarries on or after age 57 and on or after December 16, 2003, and • spouse of an active duty member who is listed as MIA or a POW for at least 90 days. Eligibility under this MIA/POW provision is limited to one-time use only. • surviving spouses of Veterans who died from non-service connected causes may also be eligible if certain conditions are met. Those conditions are found in Topic 3, subsection b(1), of this chapter. • surviving spouse who is eligible for or in receipt of certain types of Dependency Indemnity Compensation (DIC). g. Additional Eligibility The table below provides a quick reference to some additional types of eligible Veterans. This table is not exhaustive. A Veteran’s eligibility for home loan benefits may only be determined by VA. h. Other Qualifying Service Congress has periodically granted Veteran status to groups other than members of the Army, Air Force, Navy, Marine Corps, and Coast Guard, such as certain members of the Public Health Service, and cadets at the service academies. Lenders should contact one of the RLCs for assistance when one of these unique cases is encountered. i. Exceptions to LOS There are numerous exceptions to the LOS requirements outlined in this section. For example, 1 day of service is sufficient for an individual who is discharged or released from service (regular active duty or Reserve/National Guard) due to a service-connected disability which would be listed on the discharge paperwork. Because of the complexity and number of exceptions, this chapter does not attempt to cover all of them. Because there are exceptions, lenders should not assume a Veteran is not eligible. Instead, they should create an application and allow VA to make a formal determination of eligibility. j. When a COE is Denied The table below provides a quick reference to some additional types of eligible Veterans. This table is not exhaustive. A Veteran’s eligibility for home loan benefits may only be determined by VA. 6. Restoration of Previously Used Entitlement a. Basic Restoration Entitlement previously used in connection with a VA home loan may be restored under certain circumstances. Once restored, it can be used again for another VA loan. Restoration of previously used entitlement is possible if: • property which secured the VA-guaranteed loan has been sold, and the loan has been paid in full; or • eligible Veteran-transferee has agreed to assume the outstanding balance on a VA loan and substitute his or her entitlement for the same amount originally used on the loan. The assuming Veteran, substituting his/her entitlement, must also meet occupancy, income, and credit requirements. This should be completed before requesting the Loan Guaranty Certificate in WebLGY, on the new loan. b. Special Restoration Cases In addition to the basic restoration criteria outlined above, a Veteran may obtain restoration of the entitlement used on a prior VA loan under any of the following circumstances: • Regular “cash-out” refinance where the prior VA loan has been paid in full and the Veteran has made application for a refinance loan to be secured by the same property which secured the prior VA loan. This includes refinancing situations, in which the prior loan will be paid off at closing from a VA refinancing loan on the same property, or • One –time restoration where the prior VA loan has been paid in full, but the Veteran has not disposed of the property securing the loan. The Veteran may obtain restoration of the entitlement used on the prior loan in order to purchase a different property, one time only. Once such restoration is used, the Veteran’s COE will indicate the one-time restoration. The COE will also advise that any future restoration (purchase or cash-out refinance) will require disposal of all property or properties obtained with a VA loan. Example. A Veteran used all his entitlement to purchase a home for $453,100 in a non-high cost county in Maryland. Prior to job relocation to GA, he refinanced the loan to a non-VA loan. The loan was paid in full; however, he still owned the property. He now wants to purchase a home in GA and applies for a one-time restoration. This is possible. If the Veteran wants to use the benefit in the future for another purchase or regular “cashout” refinancing, both properties would have to be disposed of before entitlement can be restored. 7. Misuse of Veteran’s Entitlement a. What Constitutes Misuse? A basic requirement of the law governing the VA home loan program is that the Veteran has a bona fide intention of occupying his or her property as a home. Home loan entitlement is not being used properly if the Veteran arranges to sell or convey the property to a third party prior to closing the loan. b. What to Do? Contact the VA RLC with jurisdiction over the property for advice regarding any case in which there may be a question regarding the legality of entitlement use.

Source: VA Pamphlet 26-7, Chapter 2 (Veteran’s Eligibility and Entitlement), Topic 5 — Basic Eligibility Requirements · source URL · snapshot 488cf6b152dfffb7