Veterans Affairs (VA) Home Loans

A VA Loan is offered as a benefit to enlisted, retired and disabled veterans by the Veterans Affairs agency.  The primary qualification to obtain a VA Loan is to either be enlisted or previously enlisted.  VA offers many advantages:

  • Low to No down payments
  • Allows sellers to pay up to 4% of the borrowers closing costs
  • Less restrictive credit requirements
  • Allow for grants and down payment assistance from approved entities
  • No Mortgage Insurance required
  • Must be VA eligible


Borrower Eligibility

A veteran is a person who served in the active military, naval, or air service and is either participating in active duty or was discharged under honorable conditions.  A DD-214 form is required to show proof of eligibility (your lender can help you obtain this form).


Eligible Property Types

  • Single Family Residences
  • PUD - Planned Urban Development
  • Condominium (approved by VA)
  • Manufactured Home (must be affixed to permanent foundation)
  • Multi-Family Residence

Occupancy

All VA loans require the borrower to occupy the property as your primary residence.

 

Credit Score Requirements

VA does not require a credit score for active or discharged persons but your loan will be underwritten on your risk factor.  VA may also require alternative trade lines (which could include bills paid monthly not reported to your credit report – car insurance, cell phone are some).


Debt to Income Ratios 

The maximum percentage of debt you can hold including your home is 41%.  On occasions compensating factors can be used to go slightly above.  Compensating factors can be an impending promotion or a raise in income after you would settle on your home, a spouse’s income not going on the loan application, as well as other factors.


Upfront Funding Fee

VA has an upfront funding fee that is paid at settlement by the borrower unless closing costs were being paid by the seller through negotiations.  The funding fee is able to be financed over and above your sales price.  Thisfee is used to offset the costs in the event of foreclosures and is paid to VA through your Settlement Company or Title Company.  The funding fee is 2.15% of your sales price. 

See chart below which shows full details how the funding fee is calculated.

 

Type of Veteran

Down Payment

First Time Use

Regular Military

None

5% or more (up to 10%)

10% or more

2.15%

1.50%

1.25%

Reserves/

National Guard

None

5% or more (up to 10%)

10% or more

2.4%

1.75%

1.5%


Exclusion from Funding Fee:

  1.  Loans made to veterans receiving VA compensation for service-connected disabilities.
  2. Loans made to surviving spouses of veterans who die in service or from service-connected disabilities.


Reserves

VA does not require you to have any money in the bank after closing, but StopRenting always recommends having at least 3 months of your mortgage payments in savings to help in an emergency situation. 


Seller Concessions

The max amount of money you can negotiate a seller to pay your closing costs is 4% of your sales price.  Any money that is not covered under the 4% aide of the seller is the buyer’s responsibility.