How Does This Affect A Military Spouse
A spouse can meet the occupancy requirement for married active-duty service personnel. The same holds for married veterans who work overseas as contractors or in other roles.
Single civilians working overseas or married veterans looking to buy property in a different area from their work may find it challenging to meet the occupancy requirement.
What Is The Interest Rate On A Va Loan
Interest rates on VA loans can be fixed or adjustable.
- With an adjustable-rate mortgage, your interest rate is tied to a financial index or market interest rate, such as the Libor, and it can change periodically. If interest rates rise, your rate can go up and your monthly payments increase.
- With a fixed-rate mortgage, your interest rate and mortgage payment should stay the same for the life of the loan.
Interest rates on VA loans are typically lower than rates on conventional mortgages. But rates and fees vary among lenders, so be sure to shop around.
How To Assume A Va Home Loan
To clear up any confusion, you do not have to be a veteran to assume a VA mortgage. You might be able to purchase your dream home if you assume a VA mortgage and save some money at the same time.
Generally, there are two ways to assume a mortgage.
- The new buyer is a veteran who is eligible for VA home loans and is willing to substitute their eligibility for the sellers eligibility.
- The new buyer meets the VA criteria for mortgage payments. This is the most recommended way to assume a mortgage, as the original homeowner is no longer responsible for timely payments.
In order to get started, you need permission from the lender and the VA. In some cases, permission from the lender is sufficient.
Learn more about Certificates of Eligibility.
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Requirements To Assume A Va Loan
The following conditions must be met to meet the requirements of assuming a mortgage:
- You must have a current loan.
- The new buyer must adhere to defined by the VA and the lender.
- The new buyer must assume all mortgage obligations.
- If not, any remaining dues must be paid before the loan closing. The closing fee must be paid either by the new buyer or the original homeowner.
- The processing fee must be paid in advance.
Using The Va Loan Benefit To Build Long
The VA loan benefit was created to help military servicemembers achieve financial stability and claim their piece of the American dream in honor of their service to the country.
Strategically using VA loans to purchase multiple properties over time can help them establish a home base for themselves and their families, as well as build retirement income and savings and generational wealth.
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Va Loan Myths And Facts On Occupancy
Weve received a great deal of questions lately about VA loan occupancy requirements. There are plenty of myths, rumors and half-truths floating around about the nature of VA loans and the occupancy requirement.
What do VA loan rules actually say about the law on occupancy and what does a future VA borrower need to understand about this very important requirement?
VA loan occupancy requirements are described in VA Pamphlet 26-7, Chapter Three, Section Five. Titled, The Law On Occupancy, this section has the definitive statements borrowers need to know about purchasing and occupying a home with a VA loan.
According to Chapter Three:
The law requires a veteran obtaining a VA-guaranteed loan to certify that he or she intends to personally occupy the property as his or her home. As of the date of certification, the veteran must either
- Personally live in the property as his or her home, or
- Intend, upon completion of the loan and acquisition of the dwelling, to personally move into the property and use it as his or her home within a reasonable time.
Note that there are no exceptions, mentions of a one year rule for occupancy or other clauses that allow a borrower to move out of the property after a specified amount of time. However, VA loan occupancy rules do allow a borrowers immediate family members to fulfill the occupancy requirement on the borrowers behalf. From Chapter Three, Section Five:
What about borrowers who are not married? Chapter Five states:
What Are The Stipulations
Acquiring a second VA loan does come with certain conditions.With most lenders, you must have a renter locked into a lease and a security deposit to offset your first VA loan mortgage payment. While having a renter locked in helps your debt-to-income ratio because it offsets your mortgage payment, unfortunately, any additional rental income cant be used towards qualifying for your second loan. For example, say your monthly mortgage payment is $800, but youre going to charge your renters $1,000. That $200 extra cant be used as additional income to qualify for a second VA loan. Income qualification for secondary properties can vary by lender, so be sure to ask about the necessary underwriting guidelines when applying for a second home.Additionally, youll still need to meet the occupancy requirements of a VA loan, meaning that this new home must be your primary residence. Youll need to occupy your new home before a certain time period passes following your closing.VA loans are arguably the best loan program available. So if youre eligible, be sure you know how to take full advantage. If you have questions about keeping your home and buying again, please feel free to contact a mortgage banker.
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Va Loan Eligibility Requirements
Since VA mortgages are military loans, you might qualify if youre a vet or active-duty service member. But serving in the Armed Forces isnt an automatic approval.
To get a VA loan, you must meet one of the following military service requirements:
- Served 90 consecutive days of active service during wartime
- Served 181 days of active service during peacetime
- Served more than six years with the National Guard or Reserves
- Youre the surviving spouse of a service member who died in the line of duty or from a service-related disability
If you meet the qualifications, you can obtain a Certificate of Eligibility before applying, which is proof of your eligibility for VA financing.
Your COE also provides information about your VA entitlement.
If you havent used your VA home loan benefit before, you have full entitlement and should be able to borrow without any down payment.
You can request your Certificate of Eligibility through the Department of Veterans Affairs eBenefits portal.
Or, your lender can access the database and obtain one on your behalf, usually in just a few minutes.
Comparing The Different Va Refinance Loans
Occupancy requirements differ based on the type of refinance you’re using. As a quick primer, the two primary options for VA refinancing are the VA IRRRL and VA cash-out.
With an IRRRL, you’re refinancing one VA loan to another VA loan, typically to get a better rate and lower payment. With the VA cash-out, you’re either taking cash out from your home’s equity or refinancing a non-VA loan to a VA loan.
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How To Get Your Coe
Getting a Certificate of Eligibility is very easy in most cases. Simply have your lender order the COE through the VAs automated system. Any VA-approved lender can do this.
Alternatively, you can order your certificate yourself through the VA benefits portal.
If the online system is unable to issue your COE, youll need to provide your DD-214 form to your lender or the VA.
The Financial Implications Of Classifying Your Rv As A Primary Residence
When you purchase an RV, youre taking out a loan on a motor vehicle essentially since thats what the item was manufactured for and serves as up until the point that you decide to make it your primary residence.
Motor vehicle loan rates, mortgage rates , RV insurance and any other monthly payment, are significantly different which is why they are categorized and separated each time a person buys one or the other using a loan from a bank or any other lending institution.
Obviously, most motor vehicles cost less than buying real estate or property which is why when you decide to make your RV a primary residence the lending agreement must be converted into one using rules allocated to mortgage lending.
Dont expect to live in your RV as your primary residence while still paying interest on the loan you initially took out for the vehicle under its motor vehicle classification. This can lead to stiff tax consequences and even legal action if it can be proven that you did so in an attempt to avoid paying the appropriate taxes.
You will be required to submit periodic mortgage statements on any and all loans that are closed-end and secured by a dwelling. Once you convert your RV into a primary residence legally, youll be subject to paying the high-priced mortgage escrow fees that are often times associated with first position liens on principal dwellings.
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Veterans Spouse Or Dependent Child
Some active military members are VA loan eligible but are on active duty and away from their place of permanent residence. If this is the case, the spouse or dependent child of the VA member can occupy the house and satisfy the occupancy requirement.
Also, if the VA home buyer is no longer in the military but is temporarily away for work reasons, a spouse or dependent child can also satisfy the occupancy requirement.
How Long Do You Have To Live In A House With A Va Loan
The last thing you may be asking is, How long do I have to live in a home purchased with a VA loan?
The answer is, of course, it really depends. There’s no hard and fast rule from the VA, but typically homebuyers will sign documents at closing that say you intend to occupy the home for 12 months after closing.
However, those documents also provide a way out and you may stop occupying, or sell, before the 12 months if it’s a legitimate reason and the lender agrees.
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Va Loan Assumption Requirements
For a VA mortgage assumption to take place, the following conditions must be met:
- The existing loan must be current. If not, any past due amounts must be paid at or before closing
- The buyer must qualify based on VA credit and income standards
- The buyer must assume all mortgage obligations, including repayment to the VA if the loan goes into default
- The original owner or new owner must pay a funding fee of 0.5% of the existing principal loan balance
- A processing fee must be paid in advance, including a reasonable estimate for the cost of the credit report
How To Assume A Va Loan
There are currently two ways to assume a VA loan.
The lender and/or the VA needs to approve a loan assumption.
Loans serviced by a lender with automatic authority may process assumptions without sending them to a VA Regional Loan Center.
For lenders without automatic authority, the loan must be sent to the appropriate VA Regional Loan Center for approval. This loan process will typically take several weeks.
When VA loans are assumed, its the servicers responsibility to make sure the homeowner who assumes the property meets both VA and lender requirements.
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If You Have Good Credit And 20% Down
A primary advantage to VA home loans is the lack of mortgage insurance.
However, the VA guarantee does not come free of charge. Borrowers pay an upfront funding fee, which they usually choose to add to their loan amount.
The fee ranges from 1.4% to 3.6%, depending on the down payment percentage and whether the home buyer has previously used his or her VA mortgage eligibility. The most common fee is 2.3%.
On a $200,000 purchase, a 2.3% fee equals $4,600.
However, buyers who choose a conventional mortgage and put 20% down get to avoid mortgage insurance and the upfront fee. For these military home buyers, the VA funding fee might be an unnecessary expense.
The exception: Mortgage applicants whose credit rating or income meets VA guidelines but not those of conventional mortgages may still opt for VA.
Va Loans For Second Homes
The federal regulations have put a limit on the loans that the Department of Veterans Affairs guarantees to only primary residences.
A primary residence is defined as the property that you will reside in most of the year. In other words, if your residence is out-of-state and you live there for over 6 months in a year, then this property, regardless of whether it is a retirement property or vacation home, is considered as your official primary residence. This is why VA loans have become so popular for senior military borrowers.
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Work And Va Loan Occupancy
In instances where your job keeps you from home for extended periods, the VA is fairly flexible. You don’t need to be at your house every day to satisfy occupancy requirements, but you are expected to be there for a reasonable amount of time.
If your employment requires absence from home for a substantial amount of time, the following two conditions must be met:
- The Veteran must have a history of continuous residence in the community and,
- There must be no indication that the Veteran has established, intends to establish, or may be required to establish, a principal residence elsewhere.
Those are just a few examples. Occupancy situations vary on a case-by-case basis, so talk with a VA lender about your particular circumstances.
How To Apply For A Va Loan
Alright, youve met the eligibility requirements and youready to apply for a VA loan but you might be wondering where to even start.
First, you will need to have a VA Home Loan Certificate of Eligibility . The VA will require some information and documents from you to apply for a COE so it is best to prepare your documents beforehand so that you can get through the application process smoothly.
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Who Can Be Exempted From The Va Loan Assumption Funding Fee
If you can meet any ONE of the following conditions, your funding fee for VA loan assumption may be waived.
- You receive VA compensation for a service-related disability.
- You are eligible to receive VA compensation for a service-related disability.
- You receive compensation for pre-discharge disability.
- You are a spouse of a Veteran who either went missing in action , was a prisoner of war , died in the line of duty, or from a service-related condition.
Va Loan Mortgage Rates
VA mortgage rates tend to be lower than interest rates for other loan types.
Thats because the VA guaranty makes these loans less risky for lenders. And they can charge borrowers lower interest rates as a result.
VA borrowers have different options for their interest rate. You can choose a:
- Fixed-rate mortgage Your interest rate remains the same over the life of the loan, and so do your mortgage payments
- Adjustable-rate mortgage Your rate is fixed for a certain number of years, and then resets every year thereafter. Your monthly payments will change if your rate resets
Fixed-rates are predictable, and typically the better option when you plan to live in a home long-term.
Critical factors that influence mortgage rates include your credit score and your debt-to-income ratio.
The higher your credit score and the less debt you have, the lower your risk of default. For this reason, paying your bills on time and keeping your debt low can help you qualify for a favorable mortgage rate.
Even so, rates vary from lender to lender. So make sure you request quotes from three or four VA-approved lenders to compare rates, terms, and fees.
Finding the best deal can save you thousands even tens of thousands over the life of your VA home loan.
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