Loan Types

FHA Loan Guidelines

FHA Loans have numerous advantages over conventional loans, which include lower down payments and credit-qualifying guidelines that are typically more relaxed. The FHA loan was created to stimulate home buying throughout the country. The FHA can help people to obtain a loan with little down payment. The FHA does not supply the loan; it simply insures the loan to limit the risk to the lender.

Benefits of FHA Loans:

• A 3.5% down payment, as opposed to a 5% down payment on traditional loans
• Low monthly mortgage insurance
• Low closing costs that are overseen by HUD
• More relaxed credit score requirements
• Qualify for a loan two years after a bankruptcy
• Qualify for a loan three years after a foreclosure

The FHA loan guidelines are more relaxed than conventional loan guidelines; this includes less strict regulations about past bankruptcies and/or foreclosures, job requirements, use of alternative credit, and debt-to-income ratios. The FHA ensures that their interest rates remain competitive with the interest rates of conventional loans.

VA Loan Eligibility Frequently Asked Questions

Here you can find detailed Questions and Answers about who is eligible for a VA loan and reuse of eligibility for another VA loan.

Q: How do I apply for a VA guaranteed loan?

A: You can apply for a VA loan with any mortgage lender that participates in the VA home loan program. At some point, you will need to get a Certificate of Eligibility from VA to prove to the lender that you are eligible for a VA loan.

Q: How do I get a Certificate of Eligibility?

A: Complete a VA Form 26-1880.  Request for a Certificate of Eligibility: You can apply for a Certificate of Eligibility by submitting a completed VA Form 26-1880.  Request For A Certificate of Eligibility For Home Loan Benefits, to the VA Loan Eligibility Center, PO Box 20729, Winston-Salem, NC 27120, along with proof of military service. In some cases it may be possible for VA to establish eligibility without your proof of service. However, to avoid any possible delays, it’s best to provide such evidence.

Q: Can my lender get my Certificate of Eligibility for me?

A: Yes, it’s called ACE (automated certificate of eligibility). Most lenders have access to the ACE (automated certificate of eligibility) system. This Internet based application can establish eligibility and issue an online Certificate of Eligibility in a matter of seconds. Not all cases can be processed through ACE – only those for which VA has sufficient data in our records. However, veterans are encouraged to ask their lenders about this method of obtaining a certificate.

Q: What is acceptable proof of military service?

A: If you are still serving on regular active duty, you must include an original statement of service signed by, or by direction of, the adjutant, personnel officer, or commander of your unit or higher headquarters which identifies you and your social security number, and provides your date of entry on your current active duty period and the duration of any time lost.

If you were discharged from regular active duty after January 1, 1950, a copy of DD Form 214, Certificate of Release or Discharge From Active Duty should be included with your VA Form 26-1880. If you were discharged after October 1, 1979, DD Form 214 copy 4 should be included. A PHOTOCOPY OF DD214 WILL SUFFICE…..DO NOT SUBMIT AN ORIGINAL DOCUMENT.

If you are still serving on regular active duty, you must include an original statement of service signed by, or by direction of, the adjutant, personnel officer, or commander of your unit or higher headquarters which shows your date of entry on your current active duty period and the duration of any time lost. 

If you were discharged from the Selected Reserves or the National Guard, you must include copies of adequate documentation of at least 6 years of honorable service. If you were discharged from the Army or Air Force National Guard, you may submit NGB Form 22, Report of Separation and Record of Service, or NGB Form 23, Retirement Points Accounting, or it’s equivalent. If you were discharged from the Selected Reserve, you may submit a copy of your latest annual points statement and evidence of honorable service. Unfortunately, there is no single form used by the Reserves or National Guard similar to the DD Form 214. It is your responsibility to furnish adequate documentation of at least 6 years of honorable service. 

If you are still serving in the Selected Reserves or the National Guard, you must include an original statement of service signed by, or by the direction of, the adjutant, personnel officer, or commander of your unit or higher headquarters showing the length of time that you have been a member of the Selected Reserves. Again, at least 6 years of honorable service must be documented.

Q: How can I obtain proof of military service?

A: Standard Form 180, Request Pertaining to Military Records, is used to apply for proof of military service regardless of whether you served on regular active duty or in the selected reserves. This request form is NOT processed by VA. Rather, Standard Form 180 is completed and mailed to the appropriate custodian of military service records. Instructions are provided on the reverse of the form to assist in determining the correct forwarding address.

Q: I have already obtained one VA loan. Can I get another one?

A: Yes, your eligibility is reusable depending on the circumstances. Normally, if you have paid off your prior VA loan and disposed of the property, you can have your used eligibility restored for additional use. Also, on a one-time only basis, you may have your eligibility restored if your prior VA loan has been paid in full but you still own the property. In either case, to obtain restoration of eligibility, the veteran must send VA a completed VA Form 26-1880 to VA Loan Eligibility Center, PO Box 20729, Winston-Salem, NC 27120. To prevent delays in processing, it is also advisable to include evidence that the prior loan has been paid in full and, if applicable, the property disposed of. This evidence can be in the form of a paid-in-full statement from the former lender, or a copy of the HUD-1 settlement statement completed in connection with a sale of the property or refinance of the prior loan.

Q: I sold the property I obtained with my prior VA loan on an assumption. Can I get my eligibility restored to use for a new loan?

A: In this case the veteran’s eligibility can be restored only if the qualified assumer is also an eligible veteran who is willing to substitute his or her available eligibility for that of the original veteran. Otherwise, the original veteran cannot have eligibility restored until the assumer has paid off the VA loan.

Q: My prior VA loan was assumed, the assumer defaulted on the loan, and VA paid a claim to the lender. VA said it wasn’t my fault and waived the debt. Now I need a new VA loan but I am told that my used eligibility can not be restored. Why?

Or,

Q: My prior loan was foreclosed on, or I gave a deed in lieu of foreclosure, or the VA paid a compromise (partial) claim. Although I was released from liability on the loan and/or the debt was waived, I am told that I cannot have my used eligibility restored. Why?

A: In either case, although the veteran’s debt was waived by VA, the Government still suffered a loss on the loan. The law does not permit the used portion of the veteran’s eligibility to be restored until the loss has been repaid in full.

Q: Only a portion of my eligibility is available at this time because my prior loan has not been paid in full even though I don’t own the property anymore. Can I still obtain a VA guaranteed home loan?

A: Yes, depending on the circumstances. If a veteran has already used a portion of his or her eligibility and the used portion cannot yet be restored, any partial remaining eligibility would be available for use. The veteran would have to discuss with a lender whether the remaining balance would be sufficient for the loan amount sought and whether any down payment would be required.

Q: Is the surviving spouse of a deceased veteran eligible for the home loan benefit?

A: The unmarried surviving spouse of a veteran who died on active duty or as the result of a service-connected disability is eligible for the home loan benefit. If you wish to make application for the home loan benefit as a surviving spouse, contact our VA Loan Eligibility Center, PO Box 20729, Winston-Salem, NC 27120.  In addition, a surviving spouse who obtained a VA home loan with the veteran prior to his or her death (regardless of the cause of death), may obtain a VA guaranteed interest rate reduction refinance loan. For more information, contact VA Loan Eligibility Center, PO Box 20729, Winston-Salem, NC 27120

[NOTE: Also, a surviving spouse who remarries on or after attaining age 57, and on or after December 16, 2003, may be eligible for the home loan benefit. However, a surviving spouse who remarried before December 16, 2003, and on or after attaining age 57, must apply no later than December 15, 2004, to establish home loan eligibility. VA must deny applications from surviving spouses who remarried before December 16, 2003 that are received after December 15, 2004.]

Q: Are the children of a living or deceased veteran eligible for the home loan benefit?

A: No, the children of an eligible veteran are not eligible for the home loan benefit.

Who Can Qualify For A VA Home Loan?

The following people may qualify for a VA home loan:

• Veterans who served active duty in the Armed Forces after World War II and were discharged under terms other than dishonorable.
• During war time periods, and active duty service, the veteran must have, at the minimum, 90 days of service on their records.
• If a veteran has served only during peacetime periods, the active service requirement is 180 days, which is true for active duty military personnel.
• Enlisted service veterans who served after 1980 and officers who served after 1981 must have completed 2 years of service to be eligible.
• Selected Reserve and National Guard members are also eligible if they have served 6 years of service and were honorably discharged.

Interest Only Home Loans

Interest-only mortgages are loans secured by real estate which have an option to make payments on the interest for a period of time. That time period is limited to the first five or ten years of the loan. After that period, the loan is amortized for the remainder of its term. This means the payments move up to an amortized amount but the loan balance is not increased. Two popular mortgages are a 30-year loan where the borrower has the option to pay interest-only for the first 60 months and a 40-year loan where the borrower has the option to pay interest-only for the first 120 months of the loan.

Home Equity Loan

How does a home equity loan work?

A home equity loan  is a type of loan in which the borrower uses the value of a homeowner’s unencumbered interest in their property (equity) in their home as collateral.  These home equity lines of credit loans create a lien against the home and thus reduce the home’s equity.   Majority of borrowers use the home equity loan type to pay off high balances on credit cards.

There are two types of home equity loans:

• Closed End – the borrower gets a lump sum at closing
• Open End or HELOC (Home Equity Line Of Credit) – the borrower can choose when and how often they borrow against the property within their credit limit.

The Benefits of Home Equity Loans:

• Easy source of cash
• Lower interest rates than credit cards or other consumer loans
• Help finance home repairs, medical bills or college education

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