VA HOME LOANS
VA loans are for Servicemembers, Veterans, and eligible surviving spouses become homeowners. The program is backed by the Department of Veteran Affairs. For eligible participants, the loan allows them to purchase or refinance a house with no down payment and no mortgage insurance. Department of Veteran Affairs provides a home loan guaranty benefit to the lender making the loan.
HOW DO I QUALIFY?
To be eligible for a VA loan the borrower must obtain a certificate of eligibility. This can be done by yourself or you can have the lender request this. To check on your own you can go to the VA website. Typically, a borrower must have one of the following to be eligible. Current and former U.S. armed forces service members are typically eligible if they are currently serving, or have met service requirements with an honorable discharge.
Eligibility can be earned by serving in the Army, Navy, Air Force, Marine Corps, Coast Guard, Reserves or National guard.
You are probably eligible if you’ve served:
- 90 days during wartime
- 181 days during peacetime
- 2 Years if enlisted in Post-Vietnam era
- 6 years in the National Guard or Reserves
- Un-remarried surviving spouses are also eligible
WHAT IS ENTITLEMENT
Entitlement is the amount that the Department of Veteran Affairs is willing to guarantee for a qualified VA-eligible borrower. The Veterans Affairs Department will provide the lender this backing to encourage a lender to make loans to veterans. If a borrower has a full entitlement the VA will guarantee up to 25% of the loan amount. In Oregon, the max that they will guarantee is based off the Conforming loan limit of $ 424,100, so the max amount of guarantee is 104,250.
The VA does not have credit score limits however you will see lenders place what are called overlays to have credit scores typically over 620. If veteran has filed a chapter 7 Bankruptcy the veteran will need to be 2 years from the discharge date of the bankruptcy. If a veteran has faced foreclosure the veteran typically will be required to be 2 years from the title transfer date. If a veteran has judgements charge offs or other delinquent debt the lender will analyze the amounts and may require the veteran to pay off those by the close of the mortgage transaction.
Income needs to be considered stable and have a likely hood to continue. Self-employed will typically need to provide 2 years of tax returns to calculate the income. Commissioned or other variable income types will also typically require a 2-year history. Hourly employees will need to show a work history of 2 years with no large gaps of employment. Other types of income may be used as long as a lender can establish a history of earning and proof that it will continue for the foreseeable future, this will vary based on the type of income.
DEBT TO INCOME RATIO
In order to determine if a borrower has the abilty to repay the loan a lender will look at the veteran and any other persons on the loans total ratio of income vs. monthly recurring debts. Unlike other loan programs the VA requires the lender to use the net amount of income not gross, this means the lender will remove your federal and state taxes out of your income. Like most loan programs the VA would like to see your debt to income ratio at or below 41%. This doesn’t mean you cannot have a higher total debt to income ratio. The reason for this is unlike other loan programs the VA is more concerned with residual income, this term is how much money will you have after you pay all your monthly liabilities each month. The amount of residual income required will vary based on the amount of people in your household as well as the area of the country you live in. Contact us to find out how much residual income you will be required to have.
The VA has minimum property standards they are looking for in a home. This insures that the veteran is living in a home that is habitable and safe for their family. The lender will order an appraisal with an independent VA appraiser to ensure the property meets these standards. This typically will ensure the property meets their standards, however it does not take the place of a home inspection which is always encouraged. If you are looking at a house and have concerns contact us.