VA Loans

VA Loan Programs

VA has multiple Loan Programs that can meet anyone’s expectations if they are looking to use an VA Loan to purchase their home below are a list of the most common Loan Programs available to you:

• HUD Homes – Properties for Sale and Financed by VA
• Officer Next Door – 50% Discounted properties and financing for police officers.
• Teacher Next Door – 50% discounted properties and   financing for teachers.
• CHDAP – 100% financing using second mortgage.
• Neighborhood Gold – up to $15,000 gift funds with assistance of home seller
• CHFA Loans (CHAFA) – discounted financing option with income limitations
• Access 2000 – 100% financing with use of second mortgage.
• 203K – VA major home improvement, rehab loan.
• Single Family Home – standard VA 203(b) loan.
• Units> Duplex  Triplex  Fourplex – unit financing
• Fixed Rate VA Loans – standard VA fixed rate loan
• VA adjustable rate mortgages (ARM) - standard VA ARM, Adjustable Rate Mortgage
• VA Buydown Loans – VA 1/1 or 2/1 buy down loan.

VA Income & Asset Required

Income Guidelines

In order to qualify for an VA loan, all income must be analyzed to ensure that it is sufficient to cover the mortgage and other obligation of the borrower. Also, the stability and likelihood of continuance must also be analyzed. Income from any source that cannot be verified, is not stable, or will not continue may not be used in calculating the borrower’s income ratios.

Debt Ratios

Debt Ratios are the relationship between ones income and ones expenses. The Ratio of Income to Expense is based on 41%. This is standard for VA ratios. The number 41%, represents the relationship between the borrower’s income and his new housing expense of principal, interest, taxes, insurance, hoa’s and all recurring monthly revolving and installment debt (car loans, personal loans, student loans, credit cards and etc.). A borrower who makes $3,000 per month who has a housing expense of $870 and a recurring monthly revolving debt of $360 would give you a total fixed payment to effective income of 41%.



With the use of automated approvals, a borrowers ratios can exceed the guidelines above. Also, with compensating factors a borrower may be able to exceed the ratio guidelines.

Stability of Income

HUD does impose an arbitrary minimum length of time a borrower must have held a position to be eligible. However, the lender must verify the borrower’s employment for the most recent two full years. If a borrower indicates he or she was in school or in the military during any of this time, the borrower must provide evidence supporting this such as college transcripts or discharge papers. The borrower must also explain any gaps in employment of a month or more.



Allowances for seasonal employment, such as is typical in the building trades, etc,. may be made.
The lender or underwriter is looking to show a steady source of constant earnings. Borrowers with frequent job changes generally show a lack of stability. Also, large swings or changes in income will also lead an underwriter to question the stability of the income. A borrower who changes jobs frequently within the same line of work, but continues to advance in income or benefits should be considered favorably.

Assets

Though VA doesn’t require assets in the bank to close on a loan, each mortgage consultant might have you put a cushion in the bank of at least 2 months of all your expenses with a minimum of 2 months of mortgage payments.

VA Seller Concessions

One of the more attractive features of the VA loan is the lack of limitations on seller-paid concessions.

When negotiating the purchase of any home, one of the most effective tools to reducing the closing costs of the home is using the VA Loan combined with seller concession.

The average home has a total cost of anywhere from 3% to 5% in 3rd party closing costs. These costs are addressed in the closing cost video.

By using HUD’s VA guidelines, the average borrower can save thousands of dollars in buyer-paid costs by having a seller pay these typical closing fees.

Be sure when negotiating your purchase contract that you ask for closing costs concessions. Most lenders, including VA HUD insured loans, will allow up to 4% in seller concessions. With conventional loans, lenders can place limits on a home buyer’s ability to ask for seller-paid closing costs. These limits can reduce the amount to 3%, or can even completely strip your ability to get any seller concessions at all!

If you don’t have the funds to cover these costs, you’ll most certainly want to have these fees paid by the seller when possible. In a buyer’s market, you always want to ask. The worst case scenario is your contract is turned down completely. However, in the typical real estate transaction, a seller will simply counter your offer with what they are agreeable to. Your real estate agent can help you with these types of negotiations.

Seller paid concessions can pay the actual costs to close on your home purchase up to the percentage agreed to. These third party paid fees can cover your prepaid items, which include home owner insurance and property taxes through the end of the tax year, along with title insurance fees and your lender fees.

Seller Concessions Example

For example, if you’re purchasing a home for $100,000, your typical costs to close would break down similar to this:0% down payment – $0.004% closing costs – $4,000Total cost to close – $4,000
By negotiating a closing cost concession into your contract, you can reduce the amount of funds you need to close to $0.00.

Types of VA Loan Repayment Plans

When applying for a VA loan, there are a variety of repayment plans to choose from. If you haven’t thought of how you’d like to repay your VA home mortgage loan, now is a good time to stop and consider your options. There are five basic types of VA loan options:

• Traditional fixed payment
• Graduated payment mortgage
• Growing equity mortgage
• Traditional ARM loan
• Hybrid ARM

The traditional fixed payment loan features a specific interest rate which is fixed and does not change. This is great for stable, predictable VA home loan payments over the lifetime of the loan. If you choose a graduated payment VA loan, you get lower payments at the beginning of the loan. Those payments gradually go up over time but level off in the sixth year of the loan and remain stable afterwards. This option is good for first time home buyers who need some extra financial leeway in the early days of the mortgage payment, or for those who anticipate raises or promotions in the near future.

A growing equity mortgage offers a different type of advantage. On this type of repayment plan your VA loan mortgage payments increase gradually over time, but all the increases are applied to the principal of the loan which can help you pay it off early. Early payoff means savings in interest rate payments, a definite advantage for the long-term financial planner.

For some, adjustable rate mortgages or ARMs are the way to go, but as recent housing market woes demonstrate, it’s very important to plan carefully when getting into an adjustable rate mortgage of any kind. These mortgages are best for those who plan ahead and are thinking of refinancing the home at some stage using the VA Streamline refinance loan option or another program where the terms can be renegotiated. Traditional ARMS do have an advantage over commercial ARM loans. Traditional VA ARM loans are adjusted annually and the adjustments are limited to a one percent increase per adjustment with a maximum of 5 percentage points adjusted over the lifetime of the loan.

Hybrid ARM loans are offered with a fixed interest rate for at least three years, but the first adjustment can be as high as two percentage points if the fixed rate is locked in for five years or longer. Like traditional VA ARM loans, the cap is five percent over the lifetime of the loan.

VA Required Down Payment

More than 25.5 million veterans and service personnel are eligible for VA financing. Even though many veterans have already used their loan benefits, it may be possible for them to buy homes again with VA financing using remaining or restored loan entitlement.

Before arranging for a new mortgage to finance a home purchase, veterans should consider some of the advantages of VA home loans:
Most important consideration, no down payment is required in most cases.

Loan maximum may be up to 100 percent of the VA-established reasonable value of the property. Due to secondary market requirements, however, loans generally may not exceed $417,000.

More information:

What is a VA Loan?

What is the VA Funding Fee?

VA Credit score Requirements

VA funding fee

The VA funding fee is required by law. The fee is currently 2.15% on no down payment loans for a first-time use, is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a down payment is 3.3%. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment.

For purchase and construction loans, members of the regular military fall into the category of first time user or subsequent user.

For first time users:

• no down payment requires a 2.15% fee
• up to 10% down payment requires a 1.5% fee
• 10% or more requires a 1.25% fee.

For subsequent users:

• no down payment requires a 3.3% fee
• up to 10% down payment requires a 1.50% fee
• 10% or more requires a 1.25% fee.

For the category of Reserves / National Guard, first time users with no down payment requires:

• 2.4% fee
• up to 10% down payment requires a 1.75% fee
• 10% or more requires a 1.5% fee.

For subsequent users, no down payment requires:

• 3.3% fee
• up to 10% down payment requires a 1.75% fee
• 10% or more requires a 1.5% fee.

The following persons are exempt from paying the funding fee:

•Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay.

•Surviving spouses of veterans who died in service or from service-connected disabilities (whether or not such surviving spouses are veterans with their own entitlement and whether or not they are using their own entitlement on the loan).

VA Credit Score Requirements

In addition to your ability to pay for a mortgage VA will look at your ability to repay as indicated by your credit report. Your willingness will be judged by your credit report records — that is, how well you’ve paid your loans and other debts in the past. If you are unsure what your credit report is like, you may want to begin by getting a lenders credit report that you can view immediately.

To help you understand why credit is important and why VA will look at your credit, please try to understand the following: Perfect credit is what you are supposed to have. Whenever you borrower money (credit cards, auto loans, student loans, etc.) you are making a commitment to that creditor to pay them back on the terms mutually agreed upon. If you are late making the payment then you broke the commitment and the lender can indicate this on your credit report.

The lender does not know why you are late, they just know that you broke the commitment agreed upon. They are not responsible on helping you manage your bills and debt, as they simply make and offer and the borrower accepts the terms.  This is why your credit is very important in qualifying for a home loan. Although you are supposed to have perfect credit,  VA will allow for minor past credit issues, as long as there is a “reasonable” reason why there was an issue.  VA will look mostly at the last two years of your credit history. If there are some credit issues, we may be able to overcome them with sufficient explanations and supporting documents of why the issues occurred.

Following are some of the reasons VA will accept:

• Lost of Job
• Job Transfer
• Serious Illness

As long as it seems to make sense, and it is not just because you did not make the payment or because you had too much other debt. You should not rule yourself out of qualifying for VA loan to buy a home because of credit issues until you allowed a mortgage consultant to review your credit.

There are some credit issues that you must allow for a certain time (seasoning) to past before you can qualify for a VA loan. They are follows:

• Two years from the date of discharge for a  Bankruptcy
• Three years from the date of Foreclosure

Also VA would typically require that any outstanding collection accounts, judgments, charge off’s be paid off in full before closing your loan but not necessarily before “approving” your loan.





If you have a “Federal Tax Lien” that is in a repayment agreement, you do not have to pay it off in full but you must be able to qualify with the monthly payment of the repayment agreement.  “State Tax Liens” typically must be paid in full prior to closing your VA loan.

Another advantage of VA loans is that VA does not require a credit scoring item called a FICO (Fair Issac Company) score. So if you have no credit at all you may still qualify for a VA loan. If you have some credit you will typically need a minimum middle credit score of 620 to qualify for a VA loan.





When you apply to get pre-approved for a VA home loan, we will order a credit report for you. The credit report will show your record of payments on loans, charge cards and other similar debts. If you have never had a loan or a charge card, you can show that you have a good record of payment on your utility bills and rent payments.

We will review your credit report with you. Should you have some credit issues that prohibit you from qualifying for a VA loan now, we will show you how to correct the issues so that you we can help you qualify to purchase in the future.  In today’s world Lenders are looking for a credit score of a 620 or better in order to qualify for an VA Mortgage. But the truth is you can have a credit score lower than this with compensating factors.

For Credit Scores below 620 please contact your mortgage consultant for future information.

More information:

• What is a VA Loan?

VA Loan

The VA Loan became known in 1944 through the original Servicemen’s Readjustment Act also known as the GI Bill of Rights. The GI Bill was signed into law by President Franklin D. Roosevelt and provided veterans with a federally guaranteed home with no down payment. This feature was designed to provide housing and assistance for veterans and their families, and the dream of home ownership became a reality for millions of veterans. The GI Bill contributed more than any other program in history to the welfare of veterans and their families, and to the growth of the nation’s economy.

With more than 25.5 million veterans and service personnel eligible for VA financing, this loan is attractive and has many advantages. Eligibility for the VA loan is defined as Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continuous days during peacetime. There is a two-year requirement if the veteran enlisted and began service after September 7, 1980 or was an officer and began service after October 16, 1981.

There is a six-year requirement for National guards and reservists with certain criteria and there are specific rules concerning the eligibility of surviving spouses.

VA will guarantee a maximum of 25 percent of a home loan amount up to $104,250, which limits the maximum loan amount to $417,000. Generally, the reasonable value of the property or the purchase price, whichever is less, plus the funding fee may be borrowed. All veterans must qualify, for they are not automatically eligible for the program.

VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home, which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fails to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms.