Just like USDA does not actually make USDA Home Loans, the Veteran’s Administration doesn’t make VA Home Loans. The VA says they will partially “cover” the Lender, in the event the Veteran fails to make their payments. Because of that, many mortgage companies have their own (additional) guidelines for making VA Home Loans. So that you can compare the way we look at different components of a VA Home Loan, I thought it might be helpful to share our VA Home Loan Quick Qualifying Guidelines.
The VA funding fee can be added to 100% financing. The Funding Fee is charged based upon the number of times you’ve used your VA Home Loan benefits, and whether you served in the “regular” Military Service or the Reserves. See the chart below to see how much your fee might be. If you are a partially disabled Veteran, the VA may waive all or part of the funding fee reduced. That is a decision that is made solely by the Veteran’s Administration.
Remember, VA Home Loans have no monthly mortgage insurance.
A COE (Certificate of Eligibility) is required for all purchase and cash-out refinance transactions. We can order the Certificate for you, but we will need your DD214 . If you were discharged from regular active duty after January 1, 1950, a copy of DD Form 214, Certificate of Release or Discharge From Active Duty should be included with your VA Form 26-1880. If you were discharged after October 1, 1979, DD Form 214 copy 4 should be included.
In all cases – A PHOTOCOPY OF the DD214 WILL SUFFICE…..DO NOT EVER SUBMIT THE ORIGINAL DOCUMENT.
The maximum loan amount a Veteran can borrow in North Carolina for a VA Home Loan is $484,350 for all but the most Northern Coastal Counties in NC.
Keep in mind this is the Maximum Loan Amount for a VA loan with no down payment. If a Veteran wants to borrow more than $484,350 you only need to make a down payment equal to 25% of the amount OVER $484,350. So, for instance, if you are buying a $600,000 home, you would make a down payment of $28,912 – which is far less than the $60,000 minimum required for a Jumbo Conventional Loan!
RESERVIST! We had to contact the VA to clarify when you’ve had enough Reserve Service to qualify for Home Loan Benefits. Here’s what the Veteran’s Administration told us:
1) Ask the borrower if they drilled at least once per year for the entire 6 years they were in the Service. If they DID NOT drill at least once per year, they will not qualify for the benefit.
2) Ask the borrower if they were ever deployed. If they were deployed for at least 90 days, they will have a DD214 and that will need to be submitted.
3) If they drilled one per year for 6 years AND they were never deployed, then they will need to call the US Navy at 866-827-5672. They will ask them to provide them with a Point Statement that lists their honorable discharge.
VA Home Loan Quick Qualifying Guidelines
The seller can pay for all closing costs, i.e.—appraisal, recording fees and taxes, title work, origination fee, etc.
The Seller may also provide 4% seller concessions. Seller concessions are anything of value added to the transaction by the builder or seller for which the buyer pays nothing additional and which the Seller is not customarily expected or required to pay or provide. Examples of Seller concessions: Personal property in purchase contract (flat screen TV), Seller pays the Veteran’s VA funding fee, Seller prepays Veteran’s property taxes and insurance.
The Veteran may not pay for the Pest inspection on a purchase.
For a VA cash-out refinance, there must currently be a lien on the property. When a Well is present, a bacteria water test is required.
If you previously purchased a home using your VA Benefits then you might still have some of that “Entitlement” available to you for the purchase a new home! To Calculate Maximum Entitlement available, consider the following:
- If your previous home was purchased using a VA Loan, and that loan was paid off by the folks you sold the house to, the full entitlement may have been restored.
- If you sold your home to someone, and allowed them to ASSUME your VA Loan, then you might have the full entitlement restored, if one or more of the purchasers were also Veterans.
- If you still own the home, and you are renting it out – you might be able to purchase a new home using your partial entitlement, but there are several restrictions
The Veteran must certify that they intend to occupy the property within 60 days of Closing. If active-duty military and stationed elsewhere (i.e.-overseas or in a different state), the Veteran must occupy the home within 12 months. Note: A spouse, caretaker or a Veteran’s attorney-in fact of a Veteran’s child may fulfill the occupancy requirement as long as the Veteran will eventually reside in the home.
Residual Income Calculations make VA Loans very different to Underwrite, and do pre-qualifications. Residual income is the amount of net income remaining (after deductions of debts, obligations and monthly shelter expenses) to cover family living expenses such as food, health care, clothing, and gasoline. All members of the household are included in determining if the residual income is sufficient.
All Household members must be counted even if the veteran’s spouse is not going to be on the title or on the mortgage. In fact, anyone that the Veteran will be supporting, even children from a spouse’s prior marriage who are not the veteran’s legal dependents.
It is appropriate, however, to reduce the number of a household to be counted for residual income purposes if there is sufficient verified income not otherwise included in the loan analysis, such as child support being regularly received.
If a non-borrowing spouse works outside the home, verification that he/she has stable and reliable employment may allow us to omit the spouse from the count when determining the sufficiency of residual income.
Non-taxable income (like Social Security or Disability income) may be grossed up for purposes of calculating the DTI ratio, however, it cannot be used when figuring residual income.
The residual income figure may be reduced by 5% when the Veteran has access to military facilities such as:
- Commissary (groceries, sundry items, etc.)
- Exchange (military department and drug store)
- MRW (recreational facilities, youth activities, etc.).
- When DTI exceeds 41%, residual income must exceed the residual income guideline by more than 20% unless there are other strong compensating factors to reasonably offset the higher DTI and lack of residual income.
We are allowed to do Manual Underwriting on VA Home Loans when they will get approved through the automated system. NOT ALL Banks allow for Manual Underwrites, so this is a great service. Again, when asking for a Manual Underwriter approval, we need to be 20% OVER the Residual requirements, and we will need some compensating Factors from the list below.
Veteran Administration’s List of Compensating Factors:
- Excellent long-term credit
- Conservative use of consumer debt
- Minimal consumer debt
- Long term employment
- Significant assets or down payment
- High residual income
Veteran Administration’s Derogatory Credit Seasoning Requirements
According to the underwriters I’ve talked to lately – even though VA does Not Require a Credit Score, they will require a MINIMUM of at least 12 months of clean credit.
That’s good news! No matter what your score is – as long as you meet the minimum score requirements for the Underwriter to approve your mortgage, you will get the best Home Loan Rate for Veteran’s! In the past, a lower score could impact your rate. That’s no longer the case, and as long as we can get your loan approved, your credit score will not change your mortgage interest rate with a VA home loan!
If you’ve had a Bankruptcy – you can still get a VA Mortgage loan. You must be at least 1 year out of Chapter 13 and 2 years out of Chapter 7. Most underwriters want you to have re-established credit and have those “pesky” 12 months of clean credit. Foreclosure is treated the same as a Chapter 7, so a 2 year waiting period generally applies.
If you are looking for a mortgage, or you want to know more about VA Home Loan Quick Qualifying Guidelines – please call Steve and Eleanor Thorne 919 649 5058. We do TONS of First Time Home Buyer loans in NC, and we offer many folks the opportunity to buy a house using USDA Home Loans, VA Home Loans – down payment assistance programs… there are lots of ways to buy a house in NC with very little money out of your pocket!
Ms. Thorne,
I will be retiring from the USAF in 8 months and we are looking to use the VA Home Loan to purchase our first home. I’ve read that the lending guidelines have been more stringent since 2012 and that if I have less than 12 months of service left I will not be able to use my current pay as eligible income, that I won’t be able to use my retirement pension as qualifyfing income, and that I will have to show 2 years of post military employment in order to qualify. Is that still the case? Thank you.
I apologize for the delay, but here is what one of our Underwriter’s responded with:
The statement is correct in that we cannot use the current income because it will be ending less than 12 months from the loan closing.
When a Veteran will be relying on military retirement income, we’ll need documentation (award letter) to support the retirement income amount he/she will be receiving with at least a three-year continuance. As long as we have the appropriate documentation to support the retirement income, we may consider it as effective income.
If upon retirement from the military, the borrower will have a professional type of job, in the same line of work as his/her military experience, we may be able to use an executed employment contract for the new position/income. The contract should have no contingencies, with the start date and full-time income clearly defined. Keep in mind, we may only use base income, nothing variable.
It’s important to state again, we can only do this when the borrower is in a professional type of position, i.e. – doctor, nurse, teacher, medical tech, engineer, etc., have a fully executed employment contract with specified non-variable salary. The borrower may not be employed by a family member or an interested party to the transaction. The transaction must be a purchase of a one-unit, primary residence.