VA loans have some myths and half-truths that often need correcting as a new borrower learns about the process. Just like any government home loan program, VA loans have changing rules, requirements, and policies--some rules get altered by legislation, programs are canceled or modified, or otherwise no longer in effect. Unfortunately, word doesn't always get around about the changes.
One of the most common VA home loan myths is also the most easily corrected; newcomers to the program sometimes mistake the VA home loan guaranty for the loan itself. The VA backs the loan on the veteran's behalf but it does not issue loans, extend credit OR have the power to force a lender to do business with a borrower. If a borrower is not qualified, the bank won't issue the loan.
Another VA loan myth relates to the one mentioned above -- some loan applicants wrongly think their VA loan benefits function in the same way as some other military benefit programs -- as an entitlement based on military service. But this isn't quite true.
A qualified veteran is entitled to VA health care and compensation based on a VA determination of their status as a disabled veteran. Any vet who qualifies for benefits is entitled to them.
When it comes to VA mortgages, eligibility for VA home loan benefits is not a guarantee the veteran can ultimately qualify for a home loan.
VA loans depend on the borrower's financial responsibility as much as they do getting that certificate of eligibility. The VA home loan benefit is conditional--much depends on the borrower's credit history, the record of dependable payments, and other determining factors. The VA cannot promise every VA loan applicant an approval.
Do VA Loan rules require a borrower to have an honorable discharge in order to qualify for the program?
VA regulations for basic eligibility include a required minimum time in service, and for those who have left military service, a military discharged characterized as “anything but Dishonorable.” The minimum time in service requirements vary depending on when you joined the military and the nature of your service and the discharge you get can be characterized as Honorable, Other Than Honorable, Under Other Than Honorable.
Don’t let these myths and falsehoods deter you from beginning your VA loan application. If you still have questions about eligibility or the discharge requirements, contact your lender.