Things To Know About Va Loan Eligibility
Are you eligible for a VA loan? While it’s generally left to the VA to determine eligibility, these facts can help you get the loan you earned!
A VA loan can be a great way to finance a home. The government-backed mortgage program has several unique features that save borrowers cash both up front and each month. In fact, it’s one of the few programs available that allows for 100% loan to value , meaning you may be able to finance the full loan amount. Even better? Private mortgage insurance is never required even when you put zero down.
What borrower wouldn’t love zero down payments and no PMI? Many would, however these loans aren’t for everyone VA loan eligibility must be earned. ;Here are 10 facts about VA loan eligibility that will help you determine your own eligibility.
Find out if you’re eligible for a VA loan. to get in touch with an approved lender now.
Who Sets Va Loan Credit Score Requirements
It’s important to understand the VA’s role in the VA loan process. The VA doesn’t set a minimum credit score requirement but instructs lenders to make sound judgments.
The VA’s role is to oversee the program and guarantee a portion of each loan in case of default. But the VA does not issue loans, and the agency does not enforce credit score minimums. Private lenders handle both of these duties.
Most VA lenders use credit score benchmarks. Applicants with scores below a lender’s standard usually can’t be approved for VA financing. That minimum will vary from lender to lender.
How Does A Va Loan Differ From A Conventional Mortgage
VA loans differ from conventional mortgages in many important ways.
The VA warns that adding the funding fee and closing costs to your loan, rather than paying for them upfront, could leave you owing more than your house is worth or could reduce benefits of refinancing because your payments wont be lowered by as much.
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What Will Fail A Va Appraisal
In general, any visible health or safety concerns will pose an issue on a VA appraisal report. You wont be able to close on a home until these issues are resolved. In some cases, sellers are willing to cover the cost of essential repairs rather than lose the sale.
Some common issues include:
- Pest damage or active infestation
- Roof damage
- Exposed wiring and other electrical issues
- Utilities are shut off
You’ll need to provide your own input on the condition of the property and make sure it’s up to your standards before signing the VA loan agreement. If it’s not, you’ll need to negotiate further before agreeing to purchase the property. This is where a home inspection can pay for itself.
How Do Va Loan Requirements Compare To Others
FICO credit scores range from 300-850. FICO no longer releases the median nationwide score, but as of April 2021, the national average FICO score was 716. Keeping that in mind, a 640 minimum is fairly borrower-friendly. It’s not necessarily an easy score to obtain, but it’s an accommodating benchmark when measured against other loan options.
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A Va Loan Is Reusable
Once you completely pay off a VA loan, you regain your full VA eligibility and can reuse it for another VA loan.
You can reuse a VA loan as many times as you want, as long as the previous loan is paid off.
And like I mentioned before, you can also have two VA loans at a time, if you have enough entitlement available.
What Are The Benefits Of A Va Loan Vs A Conventional Loan
VA loans are more accommodating and less stringent than most conventional loans offered by lending banks. The VA loan program provides an opportunity for veterans to own their own homes, even on a limited budget. If you qualify for the loan, you could move into a home even if you lack the funds for a large down payment.
VA loans are offered to those who qualify at competitive interest rates with zero pre-payment penalties. Once an applicant earns a VA loan, the benefits last for the life of the loan. Applicants who are approved for the VA can use the loan to purchase a primary residential property.
As of 2019, the maximum guaranty for most VA loan rates is $484,350. However, the limit can vary by county, and select areas will guarantee costs as high as $726,525. Even though VA loans are primarily intended for borrowers who wish to purchase homes, a VA loan can also be used for other purposes, such as:
- Cash-out financing
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Va Loans Dont Require Pmi
Roughly half of home loan borrowers take out loans that require them to pay mortgage insurance.;With a conventional mortgage, borrowers usually have to pay private mortgage insurance every month when they put down less than 20%. With a VA loan, youll never pay PMI;no matter how small your down paymenteven if you put nothing down.
The savings can be substantial, especially if you have poor credit. On a $200,000 mortgage, you could save close to $4,000 per year.
Fha Repair Requirements For A Home
- Non-permitted additions Additions that are not up to code are often flagged in FHA loans, although not always
- Garages that have been built up to provide additional living space may not meet FHA requirements
- Peeling paint that is a lead hazard Usually on homes built before 1978. Here is a guide on the Federal lead paint law.
- Damaged rain gutters and unpainted downspouts
- Outbuildings that are rotten and in need of demolition
- Malfunctioning exterior doors
- Structural defects
- Basements with water issues, such as leaks or standing water
- Standing water present in the crawl space or evidence that water puddles in the crawl space at times
- Kitchen appliances that are not operational, such as a broken faucet or stove
- Non-operational swimming pools, including pools that are empty, pools that do not have a working pump and pools that have been abandoned and contain standing water
- Window screens with visible rips and tears
- Water heaters that do not have an operational pressure relief valve
- Fencing that is broken, leaning, or otherwise damaged so that it is not functional
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Selected Reserve Or National Guard:
|If you are not otherwise eligible and you have completed a total of six credible years* in the Selected Reserve or National Guard and one of the following:|
*Individuals who completed less than six years may be eligible if discharged for a service-connected disability.
Access To Other Adaptation Grants
Disabled veterans may also qualify for a Temporary Residence Adaptation grant to add modifications to your property that make it easier to navigate if you live with a family member. Like SAH grants, you wont need to pay back your TRA grant, which makes them a powerful tool for veterans with mobility-related disabilities.
Property Tax Exemption;
Property taxes fund things like libraries, fire departments, and local road and development projects. Disabled veterans property tax exemptions can lower the amount you must pay in property taxes.
These tax exemptions arent a federal program, and they vary by state, so check with your local VA office to learn the exemptions youre eligible for. Some states offer an exemption to all veterans, while other states limit this benefit to veterans who are currently receiving disability payments. Disabled veterans are 100% exempt from property taxes in some states.
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Who Is Liable After A Va Loan Is Assumed
If a veteran home buyer wants to purchase your house and assume a VA loan, it is possible to swap your entitlements. Basically, the veteran homebuyer will use their VA entitlement and in so doing, your VA entitlement will be restored. When this happens, the VA who will assume your mortgage will be liable in the event of a default.
On the other hand, if a civilian wants to purchase your home and assume a VA loan, they dont have a VA entitlement to substitute for yours. This means, your entitlement will remain tied up to the original mortgage. If the non-veteran home buyer who assumed the VA loan defaults on the loan, you can still be held liable. Aside from that, the civilian who assumed your house and mortgage may sell the property to someone else, and you will still be held liable for any losses related to the mortgage.
The buyer must sign a release of liability so the seller will no longer responsible for the mortgage once its been assumed.
Down Payment And Assets
VA loans are one of the few loan options that dont require a down payment. Your lender may have specific requirements for a no-down-payment VA loan.
For example, they may require that you have a higher credit score if youre putting down less than 10%. The requirement to purchase a home with a VA loan through Rocket Mortgage® with no down payment is still a median of 580.
Its important to keep in mind that no down payment doesnt mean zero cost. Here are some other costs, akin to closing costs due at a conventional mortgage closing, to be prepared for, even if youre putting 0% down:
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Are There Any Special Fees I Should Expect To Pay
Yes. While VA loans usually involve fewer costs, there are still some fees you need to pay. One fee unique to VA home loans is a VA Funding Fee. This fee is paid directly to the Department of Veterans Affairs. The funding fee is set at a maximum of 3.6% until 2023.
If youre looking for a way to reduce the funding fee, you can choose to make a down payment of at least 5%. You may avoid paying the fee in certain situations such as if youre currently receiving disability payments due to your military service. Active duty service members who show proof they received the Purple Heart are also exempt.
Apply For A Va Loan With Assurance Financial
The veterans loan program has brought a major piece of the American dream into the hands of those who have served in the U.S. military. Millions of Americans who may not otherwise have considered owning a home flock to this program to harness this opportunity.
If you or your spouse has served six months in the military or six years in the National Guard, you could qualify for a VA loan and move into a generous and comfortable new home. Instead of making do with a small rental, you could own a house with a back yard, a green lawn and several trees on the property.
At Assurance Financial, we help loan applicants realize a piece of the American dream by making homeownership a more affordable prospect. If you or your spouse is a veteran or active service person and you are currently in the market for a new home, Assurance Financial can help you find a loan option suitable for your situation.
As a qualified VA lender, weâve helped thousands of veterans, active service members and their families take advantage of their earned VA benefits. Contact one of our Home Loan Experts today to learn more!
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What Is The Minimum Credit Score For A Va Home Loan
The VA doesnt set a minimum credit score requirement for VA loans, so its up to private lenders to determine their own. These vary by mortgage company, but many require between a 580 to 620 minimum.
But because the VA doesnt issue a requirement, lenders have some autonomy when making loan decisions.
The VA encourages lenders to make VA loans to all qualified veterans who apply. That means the underwriting department decides whether a veteran is creditworthy based on several factors, not just their credit score.
For instance, one applicant might have had a one-time medical event which is now resolved in which he missed payments. His score is 620. Another applicant demonstrates ongoing disregard for credit obligations, but has a 640 score. The applicant with a 620 score might have a more favorable underwriting result and approval versus the scenario of the applicant with the 640 credit score.
Lenders look at things like your payment history, income, assets, and debts. So even if your score is on the low end, your chances of approval may be higher than you think.
Can I Use A Coe I Used Before
You may be able to restore an entitlement you used in the past to buy another home with a VA direct or VA-backed loan if you meet at least one of the requirements listed below.
At least one of these must be true:
- Youve sold the home you bought with the prior loan and have paid that loan in full, or
- A qualified Veteran-transferee agrees to assume your loan and substitute their entitlement for the same amount of entitlement you used originally, or
- Youve repaid your prior loan in full, but havent sold the home you bought with that loan
To request an entitlement restoration, fill out a Request for a Certificate of Eligibility and send it to the VA regional loan center for your state.
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What Are Other Va Loan Eligibility Requirements
Even though the requirements for VA loan eligibility are basic and accommodating, a private mortgage lender who finances the purchase of your first home might have a different set of requirements. Some lenders, for example, require all applicants to have good credit when applying for a mortgage.
These same lenders might also require you to meet a minimum income level or hold a job for some length of time before qualifying you for a mortgage. During the application steps for the VA loan, a mortgage broker might examine your credit score and your debt-to-income stats.
What Is A Va Loan And How Does It Work
8 Minute Read | September 24, 2021
Reaching the point in your life when youre able to buy a home is hard work. And if youre a veteran or serving in the military it can be more of a challenge compared to folks who are not. ;
So what are your options if youre a veteran and want to buy a home? Well, theres one mortgage option;specifically for veterans: the VA loan.
Lets take a closer look at how a VA loan works and if its your;best;option when youre about to jump into the real estate market.
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Contract To Buy A House For Its Appraised Value Or Less
Your property must meet the VA’s Minimum Property Requirements . The VA rules here are many, but boil down to the VA requiring the home meets local building codes, federal regulations, and HUD requirements for building safety and access. The home must be complete and contain all necessary facilities and utilities to be considered a residential property.
Your lender will order a Compliance Inspection to determine if the property meets it minimum requirements. This inspection is separate and different from an appraisal, which is an estimate of the property’s market value.
Eligibility Is Just Part Of The Va Loan Process
Eligibility is just one part of the VA loan. Four key parts make up the process. If you’re eligible and want to buy a home, get ready to prove that you also have the ability to pay your mortgage and any buying-related costs. Your lender will likely run a credit report very early in the process, and they will ask about your assets and income up front. Be prepared to back up any claims with documentation.
However, the VA loan qualifying process is straightforward. While individual lenders determine the qualifying guidelines, a credit score of around 620 is generally needed, along with a debt to income ratio of 41% or lower. Exceptions to the DTI rule do apply, such as if you have more than enough residual income. You’ll need to have enough money left over to live after paying all your monthly expenses, including your new mortgage. An approved lender will determine if you have the ability to pay for your loan.
4 Keys to VA Loan Approval
For more information about VA loan eligibility or to obtain your COE, contact an approved lender here.
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Who Provides The Homes Condition To The Lender
When you are buying a home and using FHA or VA financing there will be an appraisal done on the property by a certified appraiser. These appraisers must be approved by the FHA or VA because they are government loans.
The appraiser must follow stricter standards as you can see in the above detailing of condition requirements for VA and FHA financing.
With FHA and VA mortgages it is not enough for the property to meet all local building code and health and safety standards. The property condition levels are set to a higher standard. These rigid standards are designed to protect the lender in the event of default.
So while the objective in an appraisal with a conventional loan is solely about the market value of the property, with a government loan, it is also about the properties condition as well. Here is an excellent guide on what to know about real estate appraisals.