VA home loans are great for military service members, veterans, and their families to purchase, or refinance, a home. These mortgages are backed by the Department of Veterans Affairs (VA) and are designed to help military personnel and their families afford homeownership.

The VA’s Lender Handbook is so extensive that it’s table of contents is seven pages.

VA Home Loan Overview

VA home loans are mortgage loans guaranteed by the U.S. Department of Veterans Affairs (VA) and offered to eligible veterans, active duty service members, and certain surviving spouses. One of the benefits of a VA home loan is that it allows borrowers to obtain financing with more favorable terms, such as no down payment requirement and no mortgage insurance requirement.

When married, at least on borrower must be a veteran.

When two non-married are getting the loan, both must be vets. Two entitlements can be simulataneously used. For example, both borrowers are veterans, only one of them may use their eligibility for the VA home loan.

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Benefits of a VA loan

One of the major benefits of VA home loans is that they do not require a down payment. This is a significant advantage for military service members and veterans who may not have a large amount of money saved for a down payment or who may have difficulty coming up with the funds for a traditional mortgage.

  • 0% down
  • No MI
  • Lower credit scores
  • Higher DTI
  • Assumable
  • No Jumbo Loans

Additionally, VA home loans do not require mortgage insurance, which can further reduce the overall cost of homeownership.

Another advantage of VA home loans is that they offer more flexible credit requirements than traditional mortgage loans. While credit scores are still a factor in the loan approval process, VA home loans may allow for lower credit scores or credit challenges such as bankruptcy or foreclosure. This is beneficial for military service members and veterans who may have lower credit scores due to frequent moves or deployments, or who may have experienced financial difficulties as a result of their military service.

VA Loan Limits

Another great feature of VA home loans is that they don’t have “jumbo” financing. Moreover, VA mortgages allow for lower credit scores. For example, a veteran with a 700 credit score can purchase a $1,500,000 home with zero down payment.

Below is a table showing a sample matrix for a VA home loan. These are not VA’s official guidelines; these are sample data points to illustrate the flexibility of the program.

VA-Loan-Limits-Sample-for-VA-Home-Loans

VA Home Loans are Assumable

VA home loans also offer additional protections to borrowers. For example, VA home loans are assumable, which means that if you sell your home, the buyer can assume the remaining balance of your loan. This can be particularly beneficial in a rising interest rate environment, as it allows the buyer to secure a lower interest rate on the loan. VA home loans also have a cap on closing costs, which can help borrowers save money on fees and expenses related to the loan process.

Types of VA Mortgages

There are different types of VA home loans available, including the Basic Entitlement, the Interest Rate Reduction Refinance Loan (IRRRL), and the Native American Direct Loan (NADL). The type of loan that is right for you will depend on your specific circumstances and needs. For example, the Basic Entitlement is available to first-time homebuyers or to those who have not owned a home in the past three years, while the IRRRL is designed for borrowers who already have a VA home loan and want to refinance in order to secure a lower interest rate. The NADL is specifically for Native American veterans who want to purchase, build, or improve a home on Native American trust land.

Texas Vet is a fantastic option for Veteran’s buying a home in Texas.

VA Eligibility

The amount of the veteran’s entitlement determines the amount of financing.

VA eligibility refers to the requirements that must be met in order to receive benefits from the U.S. Department of Veterans Affairs (VA). These benefits may include healthcare, disability compensation, education and training, home loans, pension, life insurance, and burial and memorial services.

To be eligible for VA benefits, you must have served in the U.S. military, either active duty or reserve, and been discharged under conditions other than dishonorable. There are also specific service requirements that must be met, depending on the benefit you are seeking.

In addition to military service requirements, there are also income and asset limits that may affect your VA eligibility. The VA uses these limits to determine whether you are financially able to pay for certain expenses on your own or whether you need additional assistance.

If you believe you may be eligible for VA benefits, you can apply online or in person at a VA regional office. The VA will review your application and determine your eligibility based on the information you provide and your military service record.

It’s important to note that VA eligibility does not guarantee that you will receive benefits. The VA has a limited budget and must prioritize certain claims over others. However, if you are found to be eligible, you may be entitled to receive some or all of the benefits offered by the VA.

Calculate VA Eligibility

Use worksheet. 25% of guarantee fee.

The VA entitlement for a mortgage is a financial guarantee provided by the U.S. Department of Veterans Affairs (VA) to eligible veterans, service members, and certain surviving spouses who are looking to purchase a home. This guarantee helps protect lenders from loss in the event that a borrower defaults on their mortgage loan. It allows veterans and other eligible borrowers to obtain home loans with more favorable terms, such as no down payment and no mortgage insurance requirement.

To calculate the VA entitlement for a mortgage, you will need to know the maximum guarantee amount for the county where the home is located. The maximum guarantee amount is determined by the VA based on the local median home price and the borrower’s military service and financial history.

To find the maximum guarantee amount for a specific county, you can visit the VA’s website and use their VA Home Loan Limits tool. Simply select the state and county in which the home is located, and the tool will display the maximum guarantee amount for that area.

Once you know the maximum guarantee amount, you can use it to calculate your VA entitlement as follows:

  1. Subtract any outstanding VA loan balances you may have from the maximum guarantee amount. For example, if the maximum guarantee amount is $424,100 and you have an outstanding VA loan balance of $100,000, your VA entitlement would be $324,100.
  2. Determine the amount of the mortgage loan you are seeking. For example, if you are looking to obtain a mortgage loan for $300,000, this would be the amount of your VA entitlement.
  3. Subtract the amount of the mortgage loan from your VA entitlement. The result is the amount of your VA entitlement that is available to cover any potential losses in the event of default. For example, if your VA entitlement is $324,100 and the mortgage loan you are seeking is $300,000, your VA entitlement would cover potential losses up to $24,100.

It’s important to note that the VA entitlement is not a down payment and cannot be used to pay closing costs or other fees associated with the mortgage loan. It is simply a financial guarantee provided to the lender to protect them from loss in the event of default.

How To Restore VA Eligibility

If your VA Entitlement and is currently tied up on your primary home and you want to purchase another home using your VA benefits, here’s what you need to know and do:

  1. You will need to send your lender the HUD from the sale of your current home
  2. You will need to complete a Request for a Certificate of Eligibility (COE), VA Form 26-1880 and follow its instructions on how to restore your eligibility.
  3. Send the aforementioned items to us so we can upload them the to the VA via the UIL. The VA will then provide the COE within two weeks.

Please call us if you have any questions as we’re here to help.

VA Funding Fee

The VA funding fee is a fee charged to VA loan borrowers to help cover the costs of the VA home loan program. The fee is a percentage of the loan amount, and it varies based on the type of loan and the borrower’s military status and down payment amount. The VA funding fee is usually added to the loan balance, so the borrower pays it over time as part of their monthly mortgage payments. The VA funding fee helps to ensure that the VA home loan program remains self-sustaining and does not rely on taxpayer dollars to cover its costs.

VA-Funding-Fee-Chart-for-VA-Home-Loans

VA Funding Fee Exemption

The VA funding fee is a one-time charge that is added to the loan amount of a VA loan. It is used to help cover the costs of administering the VA home loan program. The VA funding fee is waived for certain individuals. All veterans must pay the VA funding fee, except for the following:

  • A Veteran who is receiving disability compensation (or who, but for the receipt of retirement pay or active service pay, would be entitled to receive compensation).
  • A surviving spouse of any Veteran (including a person who died during active military, naval or air services) who died from a service connected disability. The surviving spouse must be in receipt of Dependency and Indemnity Compensation (DIC).
  • Veteran who is rated eligible to receive compensation resulting from a pre-discharge disability examination or rating or based on a pre-discharge review of existing medical evidence that results in the issuance of the memorandum rating before the loan closing takes place.
  • As per Circular 26-19-30, a waiver of the VA funding fee has been added for members of the Armed Forces who are serving on active duty and provide, on or before the date of loan closing, evidence of having been awarded the Purple Heart.

If you are not in one of the categories listed above, you may still be able to have the VA funding fee waived if you are a veteran who is receiving VA pension benefits and you are unable to work due to a disability. To request a waiver of the VA funding fee, you will need to complete VA Form 26-8937 and submit it to the VA.

Credit Guidelines

VA home loans have certain credit requirements that borrowers must meet in order to be eligible. These requirements are designed to ensure that borrowers have a history of responsible credit management and are likely to repay their loans on time.

The minimum credit scores needed for a VA home loan vary depending on the lender and the specific loan program. Some lenders may have their own credit score requirements that are higher than the VA’s minimum requirements. However, the VA does have some general guidelines for credit scores that may help you determine your eligibility for a VA home loan.

According to the VA, most lenders require a minimum credit score of 620 for a VA home loan. However, some lenders may be willing to consider borrowers with lower credit scores if they can demonstrate a history of responsible credit management and have compensating factors, such as a stable employment history, a low debt-to-income ratio, or a strong credit history in other areas.

It’s important to note that a credit score is just one factor that lenders consider when evaluating a mortgage loan application. Other factors may include the borrower’s income, assets, debt-to-income ratio, and employment history. If you have a lower credit score and are interested in obtaining a VA home loan, it’s a good idea to work on improving your credit and reducing your debt before applying. You may also want to consider working with a lender who specializes in VA loans and may be more willing to consider alternative credit criteria.

Community Property States

A community property state is a state in which property acquired during a marriage is considered to be jointly owned by both spouses, regardless of who’s on the VA home loan.

This means that both spouses have an equal ownership interest when purchasing a primary home in a community property state.

Therefore, a non-purchase spouse’s credit must be considered for a VA home loan in a community property state. This means the debt of the spouse must be counted against the borrower, even if the spouse is not on the note.

There are nine community property states in the United States: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Community-Property-States-in-red-for-VA-Home-Loans-1
Community Property State (in red) for VA Home Loans

There are two exceptions where a property can be considered separate property. The first is if the asset was acquired before the marriage. The second exception is if a spouse acquired the property by gift or inheritance.

Previous Late Mortgage Payments

VA home loans have certain requirements that borrowers must meet in order to be eligible and to maintain their loan in good standing. One of these requirements is making timely mortgage payments. Late payments can negatively affect a borrower’s credit score and may put their loan at risk of default or foreclosure.

The VA does not specify a specific number of mortgage late payments that are allowed for a VA home loan. Instead, the VA requires lenders to follow their own policies and procedures for managing late payments and to work with borrowers to bring their loans current as soon as possible.

However, it’s important to note that the VA does have certain guidelines for managing late payments that lenders must follow. For example, the VA requires lenders to make reasonable efforts to contact borrowers who are behind on their payments and to work with them to develop a plan to bring the loan current. Lenders may also be required to offer options such as a loan modification or forbearance to help borrowers who are struggling to make their payments.

If you are having difficulty making your mortgage payments and are at risk of falling behind, it’s important to contact your lender as soon as possible. They may be able to work with you to develop a plan to bring your loan current and avoid late payments or default. If you are unable to reach a resolution with your lender, you may want to consider seeking assistance from a VA-approved housing counselor or the VA’s Loan Assistance Program.

Bankruptcy

if you have filed for bankruptcy in the past, you may be required to meet certain seasoning requirements before you are eligible for a VA home loan. These requirements, also known as waiting periods, are designed to ensure that borrowers have had sufficient time to rebuild their credit and demonstrate their ability to handle debt responsibly before obtaining a mortgage loan.

The VA has specific seasoning requirements for borrowers who have filed for bankruptcy, depending on the type of bankruptcy and the circumstances surrounding the filing. Here are the general guidelines:

  • Chapter 7 bankruptcy: Borrowers who have filed for Chapter 7 bankruptcy, also known as a liquidation bankruptcy, must typically wait at least two years from the date of the bankruptcy discharge before they can apply for a VA home loan. However, the VA may waive this requirement if the borrower can demonstrate that the bankruptcy was caused by extenuating circumstances beyond their control, such as a medical emergency or loss of income.
  • Chapter 13 bankruptcy: Borrowers who have filed for Chapter 13 bankruptcy, also known as a reorganization bankruptcy, must typically wait at least one year from the date of the bankruptcy discharge and make at least 12 on-time payments to their bankruptcy trustee before they can apply for a VA home loan.
  • Foreclosure: Borrowers who have lost a home to foreclosure must typically wait at least two years from the date of the foreclosure before they can apply for a VA home loan.

It’s important to note that these are general guidelines and that the VA may consider other factors when determining eligibility for a VA home loan, such as the borrower’s credit score, debt-to-income ratio, and employment history. If you have filed for bankruptcy or lost a home to foreclosure and are interested in obtaining a VA home loan, it’s a good idea to contact the VA directly to discuss your specific situation and determine your eligibility.

Foreclosure & Short-sale Seasoning

2 years seasoning required after a short-sale / foreclosure. If the previous home was a VA foreclosure then the eligibility must have been restored (i.e. paid back).

if you have experienced a foreclosure or short sale in the past, you may be required to meet certain seasoning requirements before you are eligible for a VA home loan. These requirements, also known as waiting periods, are designed to ensure that borrowers have had sufficient time to rebuild their credit and demonstrate their ability to handle debt responsibly before obtaining a mortgage loan.

The VA has specific seasoning requirements for borrowers who have experienced a foreclosure or short sale, depending on the circumstances surrounding the event. Here are the general guidelines:

  • Foreclosure: Borrowers who have lost a home to foreclosure must typically wait at least two years from the date of the foreclosure before they can apply for a VA home loan. However, the VA may waive this requirement if the borrower can demonstrate that the foreclosure was caused by extenuating circumstances beyond their control, such as a medical emergency or loss of income.
  • Short sale: Borrowers who have completed a short sale, which is the sale of a home for less than the outstanding balance of the mortgage, must typically wait at least two years from the date of the short sale before they can apply for a VA home loan. However, the VA may waive this requirement if the borrower can demonstrate that the short sale was caused by extenuating circumstances beyond their control, such as a medical emergency or loss of income.

It’s important to note that these are general guidelines and that the VA may consider other factors when determining eligibility for a VA home loan, such as the borrower’s credit score, debt-to-income ratio, and employment history. If you have experienced a foreclosure or short sale and are interested in obtaining a VA home loan, it’s a good idea to contact the VA directly to discuss your specific situation and determine your eligibility.

Documentation Needed

If you are considering applying for a VA home loan, it’s important to be aware of the documentation you will need to provide in order to complete the application process. The specific documents required may vary depending on the lender and the specific loan program, but there are some general documents that are typically needed for a VA home loan application.

Here are some examples of the documentation you may need to provide when applying for a VA home loan:

  • Proof of military service: You will need to provide documentation of your military service, such as your DD Form 214 or other discharge paperwork.
  • Proof of income: You will need to provide documentation of your income, such as pay stubs, tax returns, and other financial statements.
  • Proof of assets: You will need to provide documentation of your assets, such as bank statements, investment accounts, and other financial documents.
  • Credit history: You will need to provide a copy of your credit report and any credit scores that you have.
  • Property information: You will need to provide information about the property you are planning to purchase, including the purchase price, address, and details about the home.
  • Appraisal: You will need to have the property appraised to determine its value.

It’s important to note that this is just a general list of the documentation you may need to provide when applying for a VA home loan. Your lender may have additional requirements or may ask for additional documentation based on your specific circumstances. It’s a good idea to work with your lender to ensure that you have all of the necessary documentation before you begin the application process.

COE

VA COE stands for “VA Certificate of Eligibility.” It is a document issued by the Department of Veterans Affairs (VA) that certifies that a person is eligible to receive VA benefits, such as VA home loan benefits or education benefits.

The VA COE shows the type and extent of the person’s military service, and it is required in order to apply for VA benefits. To obtain a VA COE, a person must provide certain information and documentation to the VA, such as a copy of their DD-214 or discharge papers, and meet certain eligibility requirements.

The COE is a document that verifies your military service and is required in order to obtain a VA home loan. You can obtain a COE through the VA or through a lender.

DD214

The VA DD214 is a document that is issued by the Department of Defense to veterans upon their separation or retirement from military service. It is an important document that serves as proof of military service and can be used to access a wide range of benefits, including VA healthcare, education benefits, and home loan benefits.

The DD214 contains a wealth of information about a veteran’s military service, including the veteran’s name, rank, and dates of service. It also lists any awards or decorations that the veteran may have received, as well as any training or education that they received while in the military.

One of the most important parts of the DD214 is the character of discharge. This section of the document indicates how the veteran’s service ended, and it can have a significant impact on their eligibility for VA benefits. Honorable discharges are the most favorable and generally allow veterans to access all VA benefits, while less than honorable discharges may limit or disqualify a veteran from certain benefits.

If you are a veteran, it is important to keep your DD214 safe and easily accessible. You may need to provide a copy of your DD214 to the VA or other organizations in order to access your benefits. If you have lost your DD214 or need a copy of it, you can request one from the National Archives.

In summary, the VA DD214 is an important document that serves as proof of military service and can be used to access a range of benefits. If you are a veteran, it is important to keep your DD214 safe and easily accessible in order to access your benefits.

VA Closing Cost

Closing costs for a VA home loan can vary depending on a number of factors, including the lender, the property being purchased, and the location of the property. Some common closing costs for VA loans include:

  • Appraisal fee: This is a fee charged by the lender to determine the value of the property being purchased.
  • Credit report fee: This is a fee charged by the lender to obtain a credit report on the borrower.
  • Title search and insurance: This is a fee charged to cover the cost of searching for any liens or other issues with the title of the property, as well as insurance to protect the lender in case there are any problems with the title.
  • Recording fees: This is a fee charged by the local government to record the transfer of ownership of the property.
  • Survey fee: This is a fee charged to have a survey conducted of the property to ensure that the boundaries are correct and that there are no encroachments or other issues.
  • Origination fee: This is a fee charged by the lender to cover the cost of processing the loan.
  • Underwriting fee: This is a fee charged by the lender to cover the cost of reviewing the loan application and making a decision on whether to approve the loan.
  • Closing fee: This is a fee charged by the lender to cover the cost of closing the loan and transferring ownership of the property.
  • Prepayment penalty: Some lenders may charge a fee if the borrower pays off the loan early.
  • VA funding fee: This is a fee that is charged to all VA loan borrowers to help offset the cost of the VA home loan program.

In summary, VA home loans are a valuable resource for military service members, veterans, and surviving spouses looking to purchase a home.

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