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.