Are you Eligible? - DD214- COE – 100% Financing
Just because you served does not always mean you will qualify for a VA Loan. The first thing a lender will ask for is a DD214. If you do not have that, a veteran can go to The VA Website and get a copy of their COE (Certificate of Eligibility). This determines two things: If the veteran has eligibility and what amount you can purchase and also if the funding fee will be waived.
100% Financing - $424,100
The VA program offers 100% financing up to a certain sales price. It has recently been increased from $417k to $424,100. However, this does not mean that the borrower will not have other costs associated with the loan, such as closing costs, property taxes and title fees. The veteran can received help with these fees as a gift from a family member or the seller can also help pay for these. The Veteran can also save his or her own money or borrow from a 401k if needed.
The VA allows for multiple different property types. Single Family are the most popular, however the veteran can also purchase 2-4 units. The Veteran can live in one of the units as a primary unit and rent the other unit (s) out and that rental income can be used to offset some of the cost or DTI if there are current renters in the home with a lease or an appraiser can do a rental analysis of the “going market rent” of the area. The VA also offers financing for second homes and investment property – however not 100% financing. The 100% financing is for primary residents only. The VA also allows for modular, manufactured, townhomes, and condos.
FULL DOC LOAN
Just because you are a veteran does not mean you will automatically qualify. This is a full doc loan, meaning all income and information will need to be provided and documented. The VA wants to take care of their veterans and make sure they are not being out into anything that may cause issues down the road. They will need to still qualify like any other person.
The VA does not have a credit score limit but most lenders do. This will vary on your lender but some lenders will go down to a 580. However, know that the lender may have some overlays with a low credit score so you need to find out what they are. Some lenders will not allow a veteran to receive a gift for closing costs if their score is under a certain level.
Full Entitlement Restored – Sell Current
Many people feel that once they have used their VA Home benefit before they cannot use it again, or they have a yearlong wait period. Once the veteran sells their current home the full entitlement will be restored and you can do a simultaneous closings. Once you sell your home you will get your full entitlement back the same day. This is a common work around.
You can have more than one VA loan at the same time
If the veteran has a VA loan in another state or even in the same state but does not want to sell their current home, they can still get another VA loan. A lender will absolutely need to know how much entitlement is remaining so documentation is extremely important of you have a client wanting to do this especially if they are wanting to utilize the 100% financing option. If they are going to rent out their property instead of sell it, we will need a lease to offset that payment. We cannot use it as additional income and I would recommend a 12-15 month lease.
Academy has a great group of Appraisers. The VA does require that a VA appraiser goes out to evaluate the property. These appraisals do not take longer than other appraisals that is a common misconception. We do have to order the appraisals through the VA and the VA does have a set criteria/standards that protect the veteran. It is more stringent than a conventional appraisal but really require no more than an FHA appraisal. However, since this is 100% financing in most cases the VA is trying to protect their veterans.
Closing Costs are not included in Seller Concessions
A Veteran can ask the seller to pay all of their closing costs, however the seller does not have to do this. Closing costs are not consider a seller concession. In addition to closing costs the veteran can also ask for seller concessions up to 4% (non-related loan costs), common seller concessions include having the seller pay prepaid taxes and insurance, credit for items left behind, or have the seller pay off collections or judgements at closing or even credit card debt. The sky is the limit as long as it does not go over 4%. (reference Chapter 8 VA)
Even though we are mainly talking about purchases it is important to know that the VA will let a veteran refinance out of an occupancy type such as primary home loan and into a second home or investment property.