What Can a Veteran Do If He Gets Denied a Mortgage?

A VA mortgage can jump-start home ownership for a veteran.

A VA mortgage can jump-start home ownership for a veteran.

The U.S. government honors members and veterans of the U.S. armed forces with certain privileges. One of these privileges is a home mortgage program offered by the Department of Veterans Affairs. This program, like the GI Bill, gives former members, active-duty members and reservists the opportunity to purchase a new home at a lower cost than otherwise would be available.

Mortgage Denial

If you are a veteran who has been denied a mortgage through conventional underwriting and lending, you still have the opportunity to apply for a new mortgage using the Veterans Affairs process. While it may take a bit longer than conventional lending, there are some advantages. In order to qualify for this program, you must have been honorably discharged from a branch of the U.S. armed forces, be on active duty, or have completed six years of U.S. Army Reserve duty.

VA Eligibility

The most important step in qualifying for a Veterans Affairs-backed home mortgage is establishing your eligibility for these loans. To do this, you will need to get some paperwork together establishing your active duty service or your veteran status. For example, if you are a veteran, you will need to get a DD Form 214. This form lays out which branch of service you were in and when you separated service. If you are on active duty, you will need a letter from your commanding officer showing your full name, date, rank and date of birth.

Type of Mortgage

Once you establish your eligibility, you must decide what type of mortgage you would like to apply for. VA mortgages can be quite diverse. For example, you have the choice between mortgage loans with terms of 15, 20 and 30 years. Your home -- that you own or that you are purchasing -- can be a one- to four-family property. You can finance the entire home up to 100 percent of its value, which is a rare underwriting quality in mortgage lending.

Advantages

A principal advantage of a VA-insured home loan is the elimination of private mortgage insurance, commonly called PMI. If, for example, you are purchasing a new home using your VA loan, but you do not have a down payment, you can still finance the home 100 percent without paying PMI. Private mortgage insurance is charged, generally, on all loans with low or no down payment, but the insurance protects the lender, not the borrower, against foreclosure or default .

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