FAQ; Do you have to live in the home you streamline?

 

Do I Have to Live in my Home to do a VA Streamline?

 

If this question was asked about any other new purchase or refinance option in the entire VA loan program, the answer would be an unequivocal, unnegotiable “Yes”. The VA streamline (IRRRL), however, is a special case. One of the unique benefits of the VA streamline is that the occupancy requirement is much looser than in any other VA loan option. Rather than having to certify that you are either occupying currently (refinance) or intend to occupy (new purchase) the home as your primary residence, in an IRRRL you simply have to certify that you owned the home previously. (See the “Eligibility section on the VA website.) While this is a cool part of the IRRRL, there are some things to consider when contemplating using this trick to your best advantage.

Residency Policy for VA Streamline

First, is the reason this policy is in place. This policy was put in place specifically to help out active members of the military who have purchased a home at their current station, and receive PCS orders. Particularly for a servicemember who is nearing discharge or retirement, getting PCS orders after purchasing a house can throw a wrench in your plans – sometimes a very devastating wrench. Even for a young servicemember who still has plenty of time left in the military, trying to get a home with a VA loan sold in the time before leaving, along with all the other things that need taking care of can be a major stressor, and in today’s market, even an impossibility. The policy of simply having to have previously occupied the property is a way that an active servicemember can get their home refinanced very quickly and rent out the home while he or she is in a different place, rather than have to try to sell it under a time crunch.

 

Second, is seeing an IRRRL on this property from the lender’s perspective. What do I mean by this? Well, being frank, the only thing that keeps you paying your mortgage every month (aside from honesty, hopefully), is the fact that if you don’t pay up, you’ll be out on the street. Common sense and historical research agree that in times of financial trouble, a borrower is going to pay the mortgage on their primary residence first and let the second mortgage become delinquent if the borrower does not have the money to pay both. Normally, whether a new purchase or standard refinance, the lender has a chance during the loan application and underwriting process to thoroughly vet the borrower to make sure that taking on this extra risk is really a good idea, but an IRRRL is a streamline refinance – meaning that the lender just uses the credit and employment information from the previous loan. So the lender is taking a much bigger risk with even less reassurance than normal.

 

Therefore, it should not shock you to learn that many lenders will refuse to do an IRRRL for a property that is not the borrower’s primary residence. In addition, many lenders who are willing to close on an IRRRL for a secondary property will only do so if the borrower is willing to pay a higher interest rate than would be expected on the same loan for a primary residence. There are some lenders, however, like LowVARates, that have enough faith in the responsibility and integrity of our nation’s veterans and military servicemembers that not only do they offer IRRRLs for secondary homes, but they offer the same interest rates for secondary homes as for primary homes. Along with this, we offer a word of caution: sometimes when something sounds too good Get Approved for a VA Refinanceto be true, its because it is. Remember that any lender offering VA loans must be approved by the VA to do so. Make sure you’re working with a real VA-approved lender before being taken in by their amazing loan terms.

 

The last thing to remember is that you can only get an IRRRL on a home that is currently financed with a VA loan. If you want to refinance a conventional or FHA loan to a VA loan, you’ll need to use a normal VA refinance to do so. Once that is done, however, no policy is stopping you from refinancing with an IRRRL; as long as the home is financed with a VA loan at the time of applying for an IRRRL, you can use an IRRRL to refinance and experience the benefits of a VA Streamline.

 

FAQ VA Loan Eligibility

Who Is Eligible For a VA Loan?

Eligibility is one of the topics that is most frequently asked about in the VA loan program. The rules for VA loan eligibility fall into three categories: active duty servicemembers or veterans, National Guard/Reservists, and surviving spouses. There are different service requirements for those who served or are serving in active duty and those who served in the Guard/Reserve, and the requirements for active duty servicemembers differ depending on the time period in which they served. The VA offers a comprehensive table that is easy to read and see what the service requirements are for the time period you have served.

Status Qualifying Wartime & Peacetime Periods Qualifying Active Duty Dates Minimum Active Duty Service Requirement
Veteran WWII 9/16/1940 – 7/25/1947 90 total days
Post-WWII 7/26/1947 – 6/26/1950 181 continuous days
Korean War 6/27/1950 – 1/31/1955 90 total days
Post-Korean War 2/1/1955 – 8/4/1964 181 continuous days
Vietnam War 8/5/1964 – 5/7/1975 *For Veterans who served in the Republic of Vietnam, the beginning date is 2/28/1961 90 total days
Post-Vietnam War 5/8/1975 – 9/7/1980 *The ending date for officers is 10/16/1981 181 continuous days
24-month rule 9/8/1980 – 8/1/1990 *The beginning date for officers is 10/17/1981 24 continuous months, ORThe full period (at least 181 days) for which you were called or ordered to active duty
Gulf War 8/2/1990 – Present 24 continuous months, ORThe full period (at least 90 days) for which you were called or ordered to active duty
Currently On Active Duty Any Any 90 continuous days
National Guard & Reserve Member Gulf War 8/2/1990 – Present 90 days of active service
Six years of service in the Selected Reserve or National Guard, ANDWere discharged honorably, OR

Were placed on the retired list, OR

Were transferred to the Standby Reserve or an element of the Ready Reserve other than the Selected Reserve after service characterized as honorable, OR

Continue to serve in the Selected Reserve

To find out if you are eligible for a VA loan, just take a look at the table above and see what the requirements are for your service period. Even if you didn’t serve for long enough, you still might be eligible if you were discharged due to hardship, the convenience ofWho Is Eligible For a VA Loan? the government, reduction-in-force, certain medical conditions, or a service-connected disability. If you are eligible for the VA loan program, the first step you’ll need to take is to get your Certificate of Eligibility (COE). You can obtain your COE on your own if you want, but it’s usually easier to work through a lender to get it. The COE will show how much “entitlement” you have. Entitlement refers to the maximum amount that the VA will guarantee on your behalf. Speak with a VA-approved lender for more details on that, and how you can purchase a home that is more expensive than you can buy with just your entitlement.

You may have noticed that surviving spouses are not on the above table. Spouses of those who died in the line of duty or from a service-connected disability can be eligible for the VA loan program as well. If you are eligible for DIC, then you are eligible for the VA loan program. If you are eligible or aren’t sure, it’s best to get started by speaking with a VA-approved lender, who can walk you through all of the steps to get a VA loan. If you have remarried, you may no longer be eligible.
Remember that being eligible for the VA loan program is not the same thing as being approved for the loan – it is possible to be eligible for the VA loan program but not qualified for a loan. Qualifying for a loan involves passing a credit check and having sufficient income and stable employment, and if you can’t qualify for a VA loan, no lender is obligated to approve you for one. Make sure to be prepared to apply for your VA loan by paying off any debts, establishing a consistent, reliable income, and improving your credit score.

How VA Loan Eligibility Works for Guard and Reserve Members

Eligibility is different for members of the National Guard and the Reserve than it is for full-time servicemembers or veterans. The good news, though, is that members of the National Guard are still eligible for VA loan benefits, there are just different requirements. For a Guard or Reservist looking to use VA loan benefits, it’s a good idea to become familiar with the options available to you as well as the rules and restrictions to using your VA loan benefits. The VA rules explain exactly what the minimum service requirements are for Guards and Reservists and when you can begin using your benefits. The VA loan benefits do not kick in immediately upon joining up or finishing boot camp. The soldier must meet the minimum service requirements as well as several other requirements in order to be eligible for a VA-guaranteed loan.

couple back house (2) These requirements are very different from the requirements for Guards and Reservists. However, they are in the same spirit, which is making sure that those who qualify for the VA loan benefits are those who have contributed to and sacrificed for their country. For a soldier in the Guard or Reserves, the VA expects them to serve for 6 years in order to qualify for VA loan benefits. If the soldier is still serving after 6 years, he or she is fully able to apply for their Certificate of Eligibility, but if the soldier has been discharged or is otherwise no longer serving, there are other requirements.

First, the soldier must have been honorably discharged. Any less-than-honorable discharges will automatically disqualify a veteran of the Guard or Reserve from getting any VA loan benefits. The soldier may also have been placed on the retired list or transferred to the Standby Reserve or Ready Reserve and had their service in the Selected Reserve characterized as honorable. The VA considers it important that the veteran left the Guard or Reserve in good standing in order to qualify for VA loan benefits. The VA has some exceptions in place that cover those who were discharged prior to their six-year mark depending on why they were discharged. For example, if a veteran was discharged from the Guard or Reserve due to circumstances beyond their control, they can apply for eligibility in spite of not having served long enough. From the official VA website: “If you do not meet the minimum service requirements, you may still be eligible if you were discharged due to (1) hardship, (2) the convenience of the government, (3) reduction-in-force, (4) certain medical conditions, or (5) a service-connected disability.”

In more recent days, the “reduction-in-force” qualifier for being discharged can crop up more and more often as budget cuts and many other factors both political and economical have caused the entire military and all of its branches to reduce their forces. For those Guards or Reservists discharged for this reason, they can still apply for eligibility for the VA loan program. While the military will sometimes employ voluntary means of reducing force such as voluntary early retirement and incentives for voluntary separation, there are often only so many ‘voluntary’ methods the military can use to reduce their force, and many servicemembers find themselves being discharged early due to reduction in force.

Exactly what qualifies as “hardship” is foggy at best, but should be explicitly stated in your discharge papers as the reason for discharge. The “convenience of the government” is exactly as it sounds. The really good news is that those who are discharged early due to medical conditions or a service-connected disability can still be eligible for VA loan benefits. If you’re unsure if you can qualify for the VA loan program, contact the VA or a VA-approved lender and give them your information. If you were discharged before your 6-year mark for any of the above reasons, chances are you can qualify.

Limits on VA Loan Eligibility – What About Age?

It is interesting that there is so much confusion and misunderstanding surrounding eligibility for VA loans. Aside from confusion about where the money being lent in a VA loan comes from, misconceptions about VA loan eligibility are probably the most prominent of all the myths surrounding the VA loan benefit. Being clear on who is eligible for VA loans and why is obviously a very important thing for veterans or those directly related or married to a veteran. While eligibility is pretty cut-and-dry, some people who think they might not be eligible actually are, while others may be surprised to find out that they actually are not eligible for VA loan benefits.

In order for a veteran to qualify, the first requirement they must meet is their time in service requirement. This varies from branch to branch, most particularly from full-time service branches to part-time (National Guard, Reserve). The second requirement that a veteran must meet is the discharge requirement (if they have already received their discharge). Veterans with a less-than-honorable discharge are not automatically eligible for the VA loan benefit, but can take steps to be awarded eligibility. A lot of servicemembers use their VA benefits as soon as they can while still very young, while a fair amount also wait until later in life to take on the burden on finances and time that owning a home can be.

For a veteran who uses his or her VA loan benefits early, and pays off their home before age 50, it might make sense to want to purchase another home. It also makes sense that they would want to take advantage of their VA loan benefits again. A veteran in this situation (or a veteran who opted not to utilize his or her VA loan benefits until a later age) will probably wonder if they are still eligible to use the benefits. After all, it’s possible that there is a time limit on the benefits or an age limit; perhaps you have to use the benefit within 10 years of separation or before age 40, or something like that. In this area, the VA is very clear with their rules, making it easy to understand.

It is no issue for a borrower to re-use their VA eligibility a second, or even a third time. For a borrower that has fully paid off their previous home, this is a very simple process involving an application for a restoration of VA loan eligibility. For someone selling a house bought with a VA loan and hoping to buy another house with their VA benefits (a typical moving scenario) it can get more complicated, but we won’t go into detail on that here. For the borrower who has already paid off their home, they need to furnish proof that the original VA loan has been completely paid off.

One thing that might surprise a borrower is that they must sell the property they’ve paid off before their VA eligibility can be restored. While this at first seems odd, it makes sense after thinking about it; the purpose of the VA loan program is to assist the veteran in purchasing suitable housing – for a primary living residence. If the veteran already owns a home and isn’t planning on selling it, how does the VA know that the benefit is being used for its intended purpose? There are cases where the VA might approve a one-time exception to selling the home before allowing a new VA loan to be made to the borrower.

Either way, whether the house is sold or is still owned by the borrower, the VA still requires proof that the original loan is taken care of before approving a second loan. Getting eligibility restored is the veteran’s first step in getting a second loan, and must take place before a loan can be approved. The best way to go through this process is to involve your loan officer and he or she can walk you through it all step by step.

With all that cleared up, we can address whether there actually is a time or age limit on a veteran using their VA loan benefit. The answer is no, there is no maximum amount of time or age that a veteran can use the benefits. The only requirements are rather common sense and common across any legal contracts: the borrower must be of legal age and mentally competent enough to sign a legally binding contract. The requirements for legal age and mental competency vary state by state and your loan officer will be better able to provide guidance if this is a concern.

Eligibility Requirements for VA Loans

Being eligible for a VA loan opens up a world of benefits and money-saving opportunities. VA loans allow an eligible borrower to open up a loan to buy a home with backing from the Department of Veteran’s Affairs (VA). This backed, or guaranteed, mortgage motivates the lender to provide a more favorable interest rate than the borrower would normally be eligible for based on their credit score. Eligibility is based on whether the person has served or is serving in the armed forces, including Guard and Reserve servicemembers.

For a full-time service member, you are eligible essentially from the moment you graduate from basic training. Technically, a servicemember is eligible from the moment basic training starts, but good luck trying to go through the steps and hoops necessary to get one during basic training. Quite frankly, if you’re thinking about a mortgage and the benefits of a VA-guaranteed mortgage vs. a conventional mortgage while you’re knee-deep in mud running up a mountain on 2 hours of sleep, there may be something wrong with you. If the recruit were to make such a request, however, they would likely be told to wait until basic training was completed to make the request.

Once basic training is completed, as a recruit goes through individualized technical training or AIT, if the recruit were to make a request about getting a VA mortgage, he or she would likely be told the same thing. In this case, however, it has more to do with the lack of time that the recruit would have to handle such a thing. Only after training has completed will the recruit have the necessary disposable time to properly work out a VA-guaranteed mortgage.  But at the conclusion of training, the active servicemember is immediately eligible for benefits and can begin the process whenever he or she sees fit. But something that ought to be remembered is that at the beginning of military service and for the first few years, the service member will typically be moved around with some frequency. That makes it rather difficult and not usually wise to open up a VA loan in the early years of service. But it is theoretically possible if desired.

For an active servicemember to start the process for getting a VA-backed mortgage, they’ll need to meet with a lender to acquire a Certificate of Eligibility (COE). Going through a lender is not the only way to get a COE, but it is usually the easiest. Once the COE is obtained, the rest of the process can be followed, using existing documents such as recent military pay stubs as evidence for a servicemember’s eligibility.

But for a guard or reservist, the process is a little bit more complex. Just as for regular service members, the VA loan benefits provide guard and reservists an opportunity to get a better interest rate than they would normally qualify for. However, for guard and reservists, there is a requirement for minimum time served in order to be eligible for those benefits. Those serving in the Guard or the Reserves have to complete at least six years of service before being eligible. This restriction is in place because of the smaller time commitment and looser separation policies of the guard and reserves compared to full-time service. By establishing a minimum service requirement, abuse of the system is prevented in a large way.

If a guard or reservist has retired, the minimum service requirement is not a concern because it has obviously been completed and all that is required to demonstrate eligibility is an NGB Form 22. The NGB Form 22 is a Report of Separation and Record of Service. There is another form that is allowable as evidence, called the NGB Form 23, or the Retirement Points Accounting. One of these forms in addition to proof of the nature of discharge should be sufficient to establish eligibility for a VA loan.

If a member of the Selected Reserve that was never discharged would like to utilize his VA loan eligibility, they will need to provide a copy of their most recent annual retirement points statement and evidence of honorable service. If they were activated, they merely need to provide their DD Form 214.

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