When it comes to financing the purchase of a new home, the Veterans Administration (VA) will often time be the very best option for those who qualify to use the program.
In this article we will address some of the basics that any home buyer looking to purchase a home with a VA home loan, should know.
Loan Type: The Veterans Administration home loan is a type of loan that is backed by the VA and open to active duty and retired veterans of the armed forces and the National Guard. In order to obtain a VA home loan, you must be in good standing with the VA and have served for a minimum time period. The certificate of eligibility is the key item you will need to obtain to verify this eligibility and can be requested through the VA or the lender you are working with may also help you obtain this electronically.
Loan Amounts: VA home loans do not have set loan limits, but if you exceed a $417,000 loan amount, then you may be subject to additional down payment requirements, based up your eligibility limit.
Down Payments: The minimum down payment on a VA home loan is 0%, there is no minimum down payment requirement.
Funding Fee: For Veterans with a service related disability as certified by the VA, there is never a funding fee. For all other veterans and active duty service men and women, there is 2.15% funding fee the first time you purchase a home without a down payment and a 3.3% funding fee if you re-use your VA home loan to finance the purchase of a home a subsequent time. The funding fee can be reduced to 1.5% if you make a 5% down payment and to 1.25% if you make a 10% down payment.
Credit Scores: There is actually not a minimum credit score as set by the Veterans Administration, but in general most lenders will require a minimum of a 580 credit score for an VA home loan approval.
Debt To Income Ratios: The debt to income ratio is another important part of qualifying for a home loan and refers to a ratio of your monthly gross pay versus your monthly payments. For instance, if you had a gross salary of $60,000 or $5,000 per month and all of your current payments that appear on your credit report (credit cards, auto loans, student loans, etc.) are $1,000 and your new potential mortgage payment is also $1000, then your total debt to income ratio would be 40% ($2,000 / $5,000). For VA home loans, the guidance says that your total debt ratio should be no more than 41%. However, it is often possible to receive an VA home loan approval with ratio’s higher than this, if you have compensating factors, such as: steady job history a high credit score or additional assets.
Employment History: Lastly when it comes to qualify for a VA home loan, in general you want to be able to show two years’ work experience in the line of work you are currently in. It is ok to have switched jobs in the past two years, so long as the positions are in a similar line of work. In addition, if you graduated from college less than two years ago, the two year work requirement can be waived if your college experience was preparation for your current employment position.
These are just some of the basics of obtaining a VA home loan, but at the same time, if you adhere to the standards above, then you stand a good chance of putting yourself in position to qualify for a VA home loan.
As always, it is best to sit down with a licensed mortgage lender, such as Strategic Mortgage and fully qualify to see if you are ready to purchase a new home.
For more information on current home loan programs and options for existing and potential home owners, please contact Bill Kamboukos of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com
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Vasilios Bill Kamboukos Jr – NMLS#160440
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