VA Home Loan Program Information

• The VA Home Loan
• Eligibility
• Acceptable Use of a VA Home Loan
• Pre-Qualifying & Loan Amount
• Credit Requirements
• Co-Borrowers
• Closing Costs
• VA Funding Fee
• Required Documents

VA Mortgage

VA Mortgage Loans are made to qualified eligible Veteran’s by private lenders such as banks, mortgage brokers and direct lenders. The VA guarantees a portion of the loan so the lender is protected against losses if the borrower does not make the payments and defaults on the loan. This VA guarantee effectively replaces the security a lender normally receives by requiring a down payment on the property.

What this means for an eligible Veteran is that they are able to obtain favorable VA Mortgage financing for their home purchase. This includes no down payment financing for the purchase of a home, without having to pay monthly mortgage insurance. They will also receive a competitive interest rate similar to that of a conventional loan that requires a down payment.

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VA Home Loans Eligibility

Active Duty

Active Duty Personnel are eligible after having served on continuous active status for at least 90 days.

Prior Service

Prior Service Personnel eligibility is dependent on whether service occurred during Wartime or Peacetime.

• Wartime Service personnel must have served at least 90 days on active duty and been discharged or released for any reason other than dishonorable conditions. If service was less than 90 day,s they may be eligible if discharged because of a service connected disability.
• Peacetime Service personnel must have served at least 181 days of continuous active duty and been discharged or released for any reason other than dishonorable conditions. If service was less than 181 days, they may be eligible if discharged because of a service connected disability. Contact a VA Loan Specialist to determine whether 181 service days occurred during peacetime periods.

Two Year Requirement Period: If the Veteran’s period of service was between September 7, 1980 (or October 16, 1981 for officers) and August 1, 1990, the Veteran must have completed 24 months of continuous active duty or the full period (at least 181 days) for which the Veteran was called or ordered to active duty; and he must have been discharged or released for any reason other than dishonorable conditions.

Selected Reserve

If they are not otherwise eligible, members of the Selected Reserve are eligible if they have completed at least 6 years in the Reserves or National Guard, or been discharged because of a service connected disability, and one of the following:

• have been an honorable discharge
• have been placed on the retired list
• have been transferred to an element of the Ready Reserve
• continue to serve in the Selected Reserve

Other Types of Eligibility

Certain US Citizens, surviving spouses, personnel discharged for service connected disability, medical or mental conditions or reduction in force may be eligible. Please contact a VA Loan Specialist to help determine eligibility.

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VA Home Loan Acceptable Use

VA Home Loans may be used to purchase homes, town-homes and condominiums (must be a VA approved condo project), including new homes that are to be built.

VA Home Loans are intended for personal home purchases only and are not eligible to be used on rental or investment properties. The Veteran borrower must certify that they or their immediate family intend to personally occupy the home within 60 days of the closing date.

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VA Pre-Qualifying & Loan Amount

In order to determine the Veteran’s maximum loan amount, it is recommended the Veteran contact a lender familiar with the VA Loan Program to get Pre-Qualified. Pre-qualification includes the lender reviewing the borrower’s income, assets and liabilities. Using this information, the VA Loan Specialist will be able to estimate the amount of mortgage payment the Veteran can afford, which subsequently calculates an estimated loan amount and purchase price for a home.

The conventional VA Mortgage loan limit is $417,000. In certain high cost areas, the loan amount may be extended to $729,000 or in certain cases, even higher. Having VA Loan eligibility does not automatically qualify a veteran for a loan up to these amounts. The Veteran still must qualify for a loan amount based on the income, assets and liabilities of the Veteran and his/her spouse. Veterans should pre-qualify with a VA Mortgage Loan Specialist to determine their maximum VA loan amount.

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Credit Requirements – VA Mortgages

The VA Loan underwriter will analyze a Veteran borrower’s credit in order to determine approval. VA Home Loan approval is not completely driven by credit score, but focuses more on the borrower’s timely payments and credit history over the past 12 months. Under certain extenuating circumstances, the borrower can provide a letter of explanation for the underwriter to review and consider when looking at credit issues during the previous 12 month period. Veterans concerned about issues on their credit should contact a VA Loan Specialist to review their credit qualifications for a VA loan.

No or Limited Credit History

If the Veteran borrower and/or co-borrower have limited or no credit history (as determined by a credit report) then satisfactory payment history must be established, usually on three trade-lines. Trade-lines include things such as utilities, telephone bills and rental history.

Bankruptcy

Having a bankruptcy does not automatically exclude a Veteran from getting a VA Home Loan. Depending on whether it was a Chapter 7 or 13 bankruptcy, one to two years must have passed since the discharge date. The borrower must also show satisfactory credit history and job stability since the bankruptcy. A VA Loan Specialist can help determine whether a borrower with a bankruptcy in their past will qualify for a VA Home Loan.

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Co-Borrowers

Generally speaking, only the legally married spouse of an eligible Veteran is allowed to sign as a co-borrower on a VA Home Loan. If the spouse is a co-borrower, the spouse’s income as well as assets and liabilities will be included in determining both borrowers’ joint qualification for the loan amount.

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Closing Costs

Even when utilizing 100% financing, the Veteran borrower will still have closing costs that include lender, title and recording fees, as well as pre-paid escrow account items for homeowner’s insurance and property taxes. The VA Loan Program allows for the seller to pay up to 4% of the loan amount towards the Veteran borrower’s closing costs, which enables the borrower to purchase the home with less “cash out of pocket” at closing. Seller paid closing costs should be negotiated and written into the purchase contract for the home.

There are certain fees that are common in real estate transactions which are considered non-allowable on a VA Loan. The Veteran borrower is not allowed to pay these fees and they are most commonly paid by the seller when purchasing a house using VA Home Loan financing. These fees vary by lender. A VA Loan Specialist at the lender can help determine what the non-allowable fees will be.

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VA Funding Fee

The VA Funding fee varies based on several factors including the following:

• Whether or not it is the Veteran’s first VA Home Loan;
• Down payment amount, if any;
• Whether the Veteran was in the Reserves/National Guard;
• If the loan is a VA mortgage re-finance loan.

In order to determine what the funding fee will be for a specific home loan transaction, the best thing to do is contact a VA Loan Specialist for assistance.

Generally for Veteran home buyers using their VA eligibility for the first time, the funding fee is 2.15% of the loan amount. Please note that most of the time, the funding fee is not paid “cash out of pocket” but is included or financed into the loan amount. However, there are certain unusual circumstances in which the Veteran borrower would have to pay the funding fee at closing. A VA Loan Specialist can help determine when these circumstances exist.

Certain eligible Veterans are exempt from the funding fee, and it will be waived on their loan transaction. Most commonly, these are Veterans who are rated for Military disability or surviving spouses of those who died in service.

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Required Documents

In order to obtain a VA Home Loan, the Veteran borrower will need to provide several types of documents regarding both Military service and personal income. These documents include but are not limited to the following:

• Veteran’s VA Certificate of Eligibility This can be obtained by submitting VA Form 26-1880 to the VA Service center in Winston-Salem, North Carolina; or many VA approved lenders can submit the request online through the ACE (Automated Certificate of Eligibility) system which can deliver a certificate online in a matter of minutes.
• Statement of Service if on active duty.
• A copy of the Veteran’s DD214 if the Veteran has been separated from the Military.
• Past two years W2 statements
• Most recent LES or pay stubs covering one full month
• Two months of most recent bank statements

These documents will be needed in conjunction with the formal 1003 home loan application and disclosures. Additional documents may be required, depending on each borrower’s unique situation or circumstances. A VA Loan Specialist at an approved VA lender can help determine the specific documents that will be needed for each borrower and provide a complete loan package for the borrower.

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