Frequently Asked Questions on AB Loans

How to apply for AB guaranteed loan?
You can apply to any mortgage company / lender approved by AB to participate in its home loan program.

Is AB Financing easy to understand and uncomplicated?
It would have been so many years ago. However, it has changed over time with many changes effected, so that now the home loans procedure has been made much simpler and easier to understand than most other traditional financing programs.

How do I get an AB Certificate of Eligibility?
To access the particular Section of AB that deals with AB certificates of Eligibility,
CLICK HERE

Does AB levy any fees on their AB Loans?
Depending on your present Veteran status, there is Funding Fee ranging from 0-3.3% payable to the Department of Veteran Affairs. However, since this funding fee is incorporated in to the total loan amount, paying it out of pocket does not arise for the borrower. For more information, CLICK HERE

Can I get a Second AB Loan after having Already Received One?
This depends on the circumstances of each case. A borrower who has already paid off the earlier AB Loan and disposed of the property as well, can get another loan after having your entitlement restored in the Certificate of Eligibility which would have been cancelled after the first loan.

I have sold the property obtained from my first AB home loan to an assumer. Why is it that I can’t get a AB Certificate of eligibility for purchasing a new home?
You can get your eligibility restored provided that the assumer too is an eligible veteran who could offer his or her entitlement as a substitute for your initial entitlement. Otherwise, you will not be able to get your eligibility restored until the earlier AB loan is completely paid off by the assumer.  

Having lost the originals of the discharge papers without keeping any copies, how can a veteran re-establish his discharge from the military?
The next step is to obtain a Certificate in lieu of the destroyed or lost Certificate of Discharge. Seek the assistance of a Counselor on AB Veterans Benefits at any AB Office for obtaining the required proof of your service in the military.  

Can a AB Home Loan Entitlement be converted to cash by a Veteran?
It is not possible get cash against the entitlement, since it only relates to the extent to which AB underwrites a possible lender against any losses.

Can a veteran reuse an earlier entitlement already partly or fully utilized?
A veteran can get an already partly or fully utilized entitlement restored for use again provided the under mentioned conditions are met:

• The property sold and the loan is settled in full
• A veteran buyer (transferee) is found who would assume the balance outstanding on the loan and also offer his or her entitlement as a substitute for the extent of entitlement used by you originally to obtain the loan. The veteran buyer need to be income and credit qualified and also meet the requirement of the law that the property should be occupied by him.
• For Once Only – the entitlement you used for the earlier loan may be restored if that loan has been settled in full and provided the relevant property that was mortgaged as collateral for the loan, has not been sold.

There is no automatic restoration of entitlement unless it is requested by you by an application submitted to any AB Center or Regional Office in the prescribed form – AB Form No. 26-1880. With regard to the application forms in respect of the substitution of entitlement, they may be requested from the AB Office that initially guaranteed the loan.  

Can a Certificate of Eligibility issued be construed as an Approval of a AB Home Loan as well?
No. A loan may be approved only after the veteran passes a credit and income verification.

What is the Maximum Amount that may be approved for a AB Home Loan?
There is no stipulated maximum for a AB Home Loan and it is limited only by the purchase price or the “reasonable value” that may be assigned to it. However, it is the usual practice for lenders to limit a home loan to $417,000 since that is the maximum amount the secondary market will pay for it where most of the AB Home Loans are subsequently sold by the lenders.

Does a AB Guaranteed Loan constitute a Gift?
No. It has to be repaid like any other loan. The guarantee given by AB is with double purpose of indemnifying the lender against any loss up to a certain limit arising from the possible default in the payments by the veteran borrower; so that it would also act as an incentive for the lender to give the borrower better terms of finance with his risks partly underwritten by AB.

This does not prevent you from losing your home in a foreclosure in the event of defaulting on payments. However, in the event of the lender making a loss and AB paying the guaranteed sum to the lender, the amount paid by AB has to be repaid to you. For any loan that closed on or after January 1, 1990, you will not owe the government anything even in the event of a default unless you had acted in bad faith or there had been misrepresentation and fraud on your part.  

Can a veteran obtain a AB Loan and utilize it for paying off a mortgage or other liens of record attached to the veteran’s home?

• With regard to paying off the mortgage and/or other liens of record attached to the home, the loan in most cases is likely to be for a lesser amount than 90% of the reasonable value of the property as fixed by an appraisal in addition to the funding fee too, if required.
• The loan may comprise of funds acceptable to the lender for whatever purpose in addition to closing costs inclusive of some reasonable discount points. It is assumed that the veteran has the necessary home loan entitlement although an existing loan on a constructed house would not be refinanced through a AB guaranteed loan except under the circumstances described below –
• With regard to refinancing an AB home loan with a view to obtaining a lower interest rate, it is not necessary to get additional loan entitlement. Further, the amount of the loan would be limited to the balance of the former loan plus closing costs, funding fee, discount points and not exceeding $6,000 in respect of energy saving improvements. An existing AB home loan in respect of a constructed house could be refinanced with a view to obtaining a more favorable interest rate.   

Is it possible for a veteran to obtain a AB Loan for the purchase or construction of a residential property comprising of more than a single family unit?
Yes, but subject to the limitation that there could not be more than four separate family units if only one veteran were to be purchasing it.

However, in the event of more than one veteran purchasing, one additional family unit is allowed to be added in respect of each veteran participating in addition to the basic four units. Thus, one veteran may buy four units, while two may buy six units together, three veterans may buy seven units together and so on.

Additionally, if the veteran needs to fall back on rental income from the property for the purpose of qualifying for the loan, then the veteran is required to show that (a) he or she possesses the necessary background and/or the qualifications to make a success of it as a landlord, and (b) that he or she is also in possession of adequate cash reserves to meet the loan payments for at least six months without drawing on the anticipated rental income.  

Could a veteran pay off a AB Home Loan before its maturity?
Yes, there is no penalty involved for paying off a AB home loan fully or partially at any time provided that any partial payment is not less than one monthly installment or $100, whichever is less. (You may consult your lender for more details.) 
 
In the event of the demise of the veteran prior to paying off the loan in full, will the AB guarantee pay off the shortfall to the lender?
No; the balance payments must be continued by the surviving spouse or other co-borrower (if any). In the absence of a co-borrower, the remainder of the loan becomes the liability of the veteran’s estate. This contingent liability may be covered by taking an appropriate mortgage life insurance policy through some private insurance sources.