Are There Any Other Va Loan Rules To Know
There are no rules or requirements out of the ordinary. However, a couple of things borrowers often have questions on typically revolve around credit and income.
The VA doesn’t require a specific credit score for Veterans and military members who want to use their VA loan benefit. But VA lenders typically will, and it varies by lender. That said, VA credit score requirements are often more lenient with the VA guarantee.
Similarly, lenders will compute debt-to-income ratios. This measure is a snapshot of a borrower’s monthly debts and payments compared to their gross monthly income. Despite the VA’s preference for borrowers to have a 41 percent DTI ratio or lower, lenders will often allow for higher DTI ratios. That, too, can be different depending on the lender.
How To Calculate Reserve Or Guard Retirement Points
For Reserve and Guard service members, calculating military retirement pay is an important part of financial and life planning. Eligibility to receive military retirement pay is based on service points earned during service. Those points rely closely on the professional choices a service member makes.
Do you need to know how to calculate Reserve or Guard retirement points? Heres how the process works:
Va Home Loans Before Retiring From Military Or Civilian Career
Military members preparing to retire from service may be able to count their pending retirement income toward loan qualification, even before their retirement fully takes effect.
At Veterans United, we would typically need to have your official start date and exact retirement pay in writing. Lenders may be able to verify the rate of pay with a signed statement from the service members commanding officer or through a Defense Department retirement income calculator. You would qualify based on the lesser of either your current full-time income or your retirement income.
In addition, you may need cash reserves available depending on the length of time between your last full-time paycheck and your first retirement payment. Lenders may have a limit for how many days theyll allow counting pending retirement income.
The above is generally true for veterans who are retiring from their civilian careers.
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Discount Points On A Va Streamline Refinance
If youre refinancing a current VA mortgage, then youll encounter the Interest Rate Reduction Refinance Loan, or IRRRL, commonly known as the VA streamline.
The VA streamline is a reduced documentation refinance program that requires no paycheck stubs, tax returns or employment verification.
Should points be used to lower an IRRRL rate? The same logic should be used as with the VA home purchase scenario. Divide the monthly savings into the additional upfront cost. If it takes longer than two to three years to recover the extra expense, its probably better to take the slightly higher rate.
The exception would be if you absolutely know you will not sell or refinance the house until its paid off. But its hard to be that certain. Most people sell or refinance within seven years.
Dont Be Pressured Into Paying Points On A Mortgage
Congress passed the Economic Growth, Regulatory Relief and Consumer Protection Act to address abuses by unethical mortgage companies. As a result, the VA changed lending guidelines to protect future VA borrowers against predatory lenders.
Be wary of any offer that sounds too good to be true. If you feel like you havent been treated fairly, submit a complaint to the Consumer Financial Protection Bureau.
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Basic Va Loan Guidelines
Beyond service requirements, the VA provides broad guidelines to lenders making VA loans.
From a high level, to get a VA loan, you must:
- Be an eligible Veteran or military spouse with available VA loan entitlement.
- Use the VA loans for an eligible purpose .
- Occupy, or intend to occupy the home within a reasonable time .
- Be an acceptable credit risk.
- Have stable and sufficient income to make mortgage payments, pay debt obligations, cover the costs of owning a home and have enough left over for discretionary income after all major expenses.
Lenders typically have additional guidelines on top of these, known as lender overlays. For example, being an acceptable credit risk is too broad for a lender making the loan. The majority of lenders will want to establish a set credit score requirement.
Are Va Loan Points Worth It
This is the key question when youre thinking about buying VA loan points: Are the discount points worth the upfront money?
To answer that question, youd need to know the future. Youd need to know how long youll stay in the home loan: Will you refinance or sell the home in a few years? Or will you keep the loan and pay it off on schedule?
Theres no way to know for sure most Americans refinance or sell their homes before the loan term ends. The best you can do is base your decision on your current plans.
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What Is A Points Statement
Your military points statement is a record of retirement points earned while serving in the Reserves or National Guard. Points are awarded throughout your military career for different types of active duty service and inactive duty service . As an example, 15 points are awarded each year for simple participation, but additional points may be earned through monthly drills or other activities.
Rolling Discount Points Into A Refinancing Loan
Unlike with purchase loans, the VA lets refinancing homeowners roll up to 2 discount points into the new loan amount. Doing this increases your loan size.
In the following example, a homeowner with a $200,000 loan balance is refinancing into a new 30-year fixed-rate loan. The homeowner is adding the cost of discount points to the loan amount:
*the mortgage rate is for a hypothetical buyer yours will likely be different**payment does not include property taxes, home insurance, or other add-ons
In the example above, the VA would not allow you to finance the cost of discount points because the break-even point extends beyond three years. But you could still buy down your rate by bringing cash to closing.
These rules apply to the VA cash-out refinance as well as the VA IRRRL. With the cash-out refi, you can finance up to 2 points into your new loan as long as the points dont push your loan amount past the appraised value of your home.
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Maximum Points In A Given Year
The maximum number of Retirement Points a servicemember can earn in any given year is 365 . This corresponds to serving every day on active duty . You will note that you cannot double dip on Retirement Points and do correspondence courses or other service to earn more than 365 Points in a given year.
- Reserve year ends on or after 30 Oct 2007: max of 130 Points
- Reserve year ends on or after 29 Oct 2000: max of 90 Points
- Reserve year ends on or after 23 Sep 1996: max of 75 Points
- Before 23 Sep 1996: max of 60 Points
These limits apply across all branches of the military.
Can I Order My Points Statement From Dd214direct
Yes. DD214Direct.com offers a number of services to help you locate and retrieve your military records. In addition to tracking down a copy of your DD214, our experienced team can also locate retirement points statements for Army, Air Force, Marine Corps, and Navy Reserve members as well as for Army and Air National Guard members. This includes the DA5016 for Army Reservists and the CRCR for Marine Corps Reservists.
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Va Loan Eligibility For National Guard And Reserve
National Guard members and Reservists can tap into the same VA loan benefit thats helped generations of Veterans and active duty service members achieve the dream of homeownership.
Guard and Reserve members first gained access to the VA loan benefit in 1992. Legislation passed in 2020 swung open the doors to even more Guard members whove performed full-time duty.
Lets take a closer look at the broad eligibility guidelines for Guard and Reserve, along with the latest changes that will make an estimated 50,000 more Guardsmen eligible for this historic home loan benefit.
Is A Va Loan Right For You
A VA loan is an important benefit earned by our military. If you qualify, you can get a great interest rate with no money down, and even past credit problems.
If you feel like youre ready, apply for a VA loan with Rocket Mortgage® today!
Get approved to buy a home.
Rocket Mortgage® lets you get to house hunting sooner.
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How Many Times Can You Use A Va Loan
Fortunately for veterans and service members, you can use a VA loan as many times as you wish.
This doesnt mean you can hold unlimited numbers of loans each service member receives a specific amount of entitlement. Your basic entitlement is $36,000, which means that if youve got a home loan under $144,000, the VA guarantees your lender that theyll pay $36,000 in the event of default. For loans over this amount, the VA will pay up to 25% of the loan amount. Its important to note that these arent the limits to how much you can borrow. If youve got full entitlement, the VA wont set a limit on how much your loan can be.
Even if youve already used your VA loan, you can still use it again. If youre looking to restore your full entitlement, youll need to have paid off your loan in full and no longer own the property.
You can still qualify for your full entitlement even if your home was foreclosed as long as youd paid the VA back in full.
How Va Discount Points Work
Weve already answered the question Can I buy down points on a VA loan? Its just one of many advantages active-duty and retired military service members enjoy with a home loan backed by the U.S. Department of Veterans Affairs . Other benefits include no down payment, no mortgage insurance and lenient qualifying guidelines.
A discount point is a percentage of your loan amount. The more youre willing to pay, the lower your interest rate and ultimately your mortgage payment will be. A full point equals 1% of your loan amount. For example, if youre borrowing $200,000 and pay one point for a lower rate, itll cost you $2,000.
However, points arent always round numbers. You may also pay partial points to get a lower rate on a VA home loan. If the extra $2,000 for a full discount point on a $200,000 loan is too pricey, you could choose to pay half of a point, which would cost you $1,000. The catch: Your interest rate usually wont drop as much with a smaller discount buydown.
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Category A: Veterans Active Duty And Reservists/national Guard Members Who Have Served On Active Duty
You can get a Certificate of Eligibility in any of three ways:
When Not To Use A Va Loan
If you have good credit and 20% down
A primary advantage to VA homeloans 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 3.6percent, depending on the down payment percentage and whether the home buyerhas previously used his or her VA mortgage eligibility. The most common fee is2.3 percent.
On a $200,000 purchase, a 2.3 percent fee equals$4,600.
However, buyers who choose a conventional mortgage and put 20 percent down get to avoid mortgage insurance and the upfront fee. For these military home buyers, the VA funding fee might be an unnecessary expense.
Theexception: Mortgage applicants whose credit ratingor income meets VA guidelines but not those of conventional mortgages may stillopt for VA.
If youre on the CAIVRS list
To qualify for a VA loan, you mustprove youhave made good on previous government-backed debtsand that you have paid taxes.
The Credit Alert VerificationReporting System, or CAIVRS, is a database of consumers who have defaulted ongovernment obligations. These individuals are not eligible for the VAhome loan program.
If you have a non-veteran co-borrower
Veterans often apply to buy a home with a non-veteran who is not their spouse.
This is okay. However, it might not be their best choice.
The Conventional 97 mortgage, on the other hand, allows down payments as low as three percent.
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Q: How Do I Get A Certificate Of Eligibility
A: Complete a VA Form 26-1880, Request for a Certificate of Eligibility: You can apply for a Certificate of Eligibility by submitting a completed VA Form 26-1880, Request For A Certificate of Eligibility For Home Loan Benefits, to the , along with proof of military service. In some cases it may be possible for VA to establish eligibility without your proof of service. However, to avoid any possible delays, it’s best to provide such evidence.
Va Loan Eligibility Requirements
How do you know if you are eligible to get this benefit? If you are an Active Duty Service Member, Veteran or a former or current member of the National Guard/Reserves, you are most likely eligible for a VA home loan. Each military category has a set of minimum service requirements which change based on which years were served.
For the Gulf War , service requirements are as follows:
- 24 months of continuous active-duty with other than dishonourable discharge
- 90 days or completed full term that was ordered to active duty with other than dishonourable discharge
- 90 days active duty, but discharged for hardship, convenience of the Government, early out, a RIF , or a compensable service-connected disability
- Less than 90 days active duty is allowable if you were discharged for a service-connected disability Service During Peace Time
If you were separated from service after September 7, 1980 :
- 24 months of continuous active duty with other than dishonorable discharge
- At least 181 days or completed full term of active duty with other than dishonorable discharge
- 9At least 181 days of active duty and discharged for hardship, convenience of the Government, early out, a RIF , or a compensable service-connected disability
- Less than 181 days active duty is allowable if discharged for a service-connected disability
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What Are Va Loan Points
Buying a VA loan point also known as a discount point or just a point means youre paying cash up front to lower the interest rate on your new home loan.
A VA loan point typically costs 1% of your loan amount. As a result, the cost of a point varies by the size of your home loan. One point on a $200,000 VA loan is $2,000 and two points equals $4,000. On a $250,000 loan, a single point would cost $2,500 while two points would cost $5,000.
Lenders use the term discount point because buying points discounts the interest rate on a veterans home loan.
Compare Top Va Purchase Lenders
Take the guesswork out of finding a VA Loan provider. Veterans United Home Loans created this site to educate and empower military homebuyers. Regardless of what lender you pick, it’s always a good idea to compare and know your options.
- NMLS # Loading Reviewsâ¦
- ranks No. 1 in Customer Ratings for VA purchase lenders, according to ratings and reviews collected by TrustPilot.
- In , closed 0 VA Purchase Loans, which was 9% of all VA Purchase Loans closed nationwide last year.
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Who Qualifies For A Va Loan
As for the service requirements for the VA loan, the VA requires prospective borrowers to meet one of the following:
- Serve 90 consecutive days on active duty during wartime, or
- Serve 181 days on active duty during peacetime, or
- Serve 6 years in the Reserves or National Guard, or
- Be the surviving spouse of a service member who died while serving or due to a service-connected disability.
If you served less than the requirement with a discharge other than dishonorable, you still might be eligible. You can request a lender pull your Certificate of Eligibility to determine your status.
Speaking of your COE, if you are unsure of your status, you can start the VA loan process by contacting a lender and obtaining your COE. Contacting a lender for your COE clears up the difficult questions around overlapping service, or if basic training counted towards your eligibility.
For anyone else wondering the difference between wartime and peacetime, see the following breakdown: