The nature of your clients' discharge can greatly affect weather or not they can utilize the VA to obtain a loan for the swanky new house they're looking at. The Certificate Of Eligibility (COE) gets even more complicated when one or both of your home buyers were discharged under "other than honorable conditions." The short answer is they are not disqualified from purchasing a home, but they will need to "upgrade the discharge" that will change the character of service on their DD-214 which directly impacts their VA benefits. You can take a look here at the process and information needed. Basically they apply to a Defense Review Board by Service. The law also states they have 15 years to apply from their discharge date. If it's past 15 years they must apply for a change to military records. An even more difficult and lengthy process
Today most certificates show discharges in one of these ways:
- Honorable
- General (Under Honorable Conditions)
- Other than Honorable
- Bad Conduct or Dishonorable
If your first time home buyers are attempting to buy their house using a VA loan and want to upgrade their discharge, they'll need to take action ASAP. They need to understand what they're facing and so do you as an agent, the process is lengthy and statistically the odds are against them and most applications are denied. If I was the agent and they wanted to continue looking, I'd recommend we keep looking, however, I'd highly recommend they try to get financing using a conventional loan if they wanted to purchase a home lickety split. Conversely, I'd probably tell them to focus on getting their VA status changed if they're hell bent on getting a VA loan and put home looking on hold while working their way through the process.
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