What You Should Know About VA Loans
Veterans Administration (VA) loans are special home loans given to current and past members of the U.S. military. They are guaranteed by the federal government, so there are several perks to VA loans that we afford to our veterans for their service.
I’ve worked on a great deal of VA loans for Arizona’s veterans and I’ve noticed that many of them share the same questions. I wanted to take a moment to go over some frequently asked questions I’ve answered over my last thirteen years working as a loan officer here in Phoenix.
Top Ten Questions Veterans Ask About VA Loans:
1: Is there limit on the size of a VA Loan?
Yes. The limit for a typical zero down VA loan is $417,000, but there are exceptions made for areas with a high cost of living. For example, in certain metropolitan areas it’s possible to get a VA loan up to $1 million.
2: Can I get more than one VA Loan?
Another yes, but the VA will want to know what happened with your first loan. You will need a Certificate of Eligibility (Form-26-1880). If you served after 1971 you can request your certificate online. To apply for any VA loan you will need your DD214 (discharge) paperwork. If you’ve lost it, you can obtain at the Nation Archives. If you are currently active military you will need a proof of service.
Proof of service for veterans on active duty is a statement of service signed by, or by the direction of, the adjutant, personnel office, or commander of the unit or higher headquarters they are attached to. There is no one unique form used by the military for a statement of service. While statements of service are typically on military letterhead, some may be computer-generated.
The statement of service must clearly show:
- The veteran’s full name,
- Social Security Number (SSN),
- The entry date on active duty,
- The duration of lost time, if any, and the name of the command providing the information.
3: Is a down payment required?
This is one of the perks of getting a VA loan, there is zero down payment requirement unless you go over the loan limit for you area. If you go over your area’s limit, you will be required to pay 25% down payment of the amount over the limit.
4: Is there PMI (Private Mortgage Insurance) at all?
No, actually. However there is a VA funding fee of 2.15% for first time buyers (2.4% for Reserves/National Guard) and 3.3% for everyone else with zero down payment. That fee is rightfully waived for disabled veterans. Luckily, you can finance this fee on top of your loan, which will keep out of pocket costs down. Click here for more information regarding the VA funding fee amounts.
5: Are there benefits for disabled veterans?
If you have a ten percent or more service connected disability you are not required to pay (or finance) the VA funding fee. Statistics show that 70% of all veterans are awarded a disability status. One way to know if you are potentially eligible is if you are receiving a service related tax free disability check from the federal government.
6: I once lost my home to a VA foreclosure. Can I get another VA loan?
Yes you can, but the VA subtracts the net loss from your previous loan from your eligibility. For example: If you had a $250,000 home loan foreclosed on and then the home was sold by your lender where they received net proceeds of $200,000, then your eligibility will be $50,000 less on a second VA loan.
7: Can I get a VA loan for a multi-family property?
Yes you can but you must live in one of the units so the property is owner-occupied.
8: Can I get a VA loan with my fiancée?
Unless your fiancée is another veteran, then no you cannot. It must be your spouse, or another veteran.
9: Do I still have VA eligibility if I’ve declared bankruptcy?
Yes, depending on the time since bankruptcy and the type of bankruptcy declared. For a chapter 7 bankruptcy, with all debts wiped out, there is a 2 year waiting period. With a chapter 13 bankruptcy or debt reorganization plan, you will need permission from the court and a printout showing all payments over the last year were on time. You must also be at least 12 months into your reorganization agreement.
10: Can I buy undeveloped land with a VA loan?
No, you can only use VA loans for your primary residence.
Bonus #1: My spouse has bad credit. Can I exclude them from the loan?
Yes, however the spouse’s payments on their credit only in their name will also be considered in the Debt to Income (DTI) ratio for the qualifying for the loan. You can count enough of the non-borrowing spouse’s income to offset those debts as long as they have a full time or part time job for the past 24 months.
Bonus #2: What is the minimum credit score required?
This can vary from lender to lender. However, a general rule of thumb is that you want your middle score of the three major credit reporting bureau’s to be no less than 620. I would not recommend that you purchase a credit score from the internet. Those scores are usually consumer based and not tied to the scoring model used to get a mortgage.
One tip to improve your credit score is to pay down your balance to less than 50% of the credit limit for each credit card. You can click here for more information on how to improve your credit scores, or click here for help with your credit. Eighty percent of all credit reports have errors, so click here for information on how to get your free credit report to check it for errors.