| VA Borrower Eligibility |
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Veteran
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Veteran with Spouse
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Veteran with another veteran
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Veteran with Non-veteran (who is not the spouse) is sent directly to the VA Eligibility center for prior approval (*typically with 25% down) |
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| Veteran Entitlement Service Period |
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| ERA |
Dates |
Minimum Service |
| WWII |
9-16-40 thru 7-25-47 |
90 continous days |
| Peacetime |
7-26-47 thru 6/26/50 |
181 days |
| Korean |
6-27-50 thru 1-31-55 |
90 days |
| Post-Korean |
2-1-55 thru 8/4-64 |
181 days |
| Vietnam |
8-5-64 thru 5-7-75 |
90 days |
| Post-Vietnam (Enlisted) |
5-8-75 thru 9-7-80 |
181 days |
| Post-Vietnam (Officer) |
5-8-75 thru 10-16-81 |
2 years |
| Post Vietnam (Officer) |
9-8-80 thru 8-1-90 |
2 years |
| Persian Gulf |
8-2-90 thru undetermined |
2 years or period called to active duty, not less than 90 days |
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| Other Eligible Persons |
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| Active Duty Members |
90 continous days, or 181 during peacetime (excluding basic training) |
| Active Reserve or National Guards |
6 active years in selected reserves |
| Un-remarried surviving spouse |
No time requirement, Veteran must have died on active duty or from a service-connected disability. |
| POW/MIA spouse |
Veteran must have been a POW or MIA for 90 days |
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| Eligible Loan Purpose |
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Purchase 1- 4 family units, including |
| Condominiums (VA approved) |
| Townhouses |
| Manufactured Home (and Lot) |
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To Build a Home
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To Purchase and improve a home
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To improve a home by installing energy-related features
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To Refinance an existing home loan for the purpose of:
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Cash Out – up to 100% of appraised value (most lenders cap at 90% LTV) |
| Reducing the interest rate (IRRRL) |
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Interest Rate Reduction Refinance Loan |
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Only existing VA loans qualify |
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Converting an adjustable rate mortgage (ARM) to a fixed rate mortgage |
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| Available Programs |
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Fixed Rate |
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Adjustable Rate Mortgage (ARM) |
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1 year – must Qualify at 1% above note rate |
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3/1 |
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5/1 |
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Margins: 1 YR = 2.25%, 3/1 and 5/1 = 1.75% |
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Caps: 1/5 |
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| Maximum Loan Limits |
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Purchase and Refinance = $417,000 (depending on the county the property is in, the VA Jumbo Loan may be available)
*Click here for list of High Cost Counties
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| Refinance (IRRRL) = up to VA loan limit
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| Maximum LTV’s |
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Zero Down
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| 100% LTV
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| LTV may be up to 103.3% (when Funding Fee is financed)
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| Loan Approval Requirements |
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Applicant must be an eligible veteran who has available entitlement;
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| 100% LTV
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| The loan must be for eligible purposes;
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| Veteran must occupy home within a reasonable period after closing;
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| Veteran must be a satisfactory credit risk, and
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| Income must be stable and sufficient to
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Meet mortgage payment |
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Take care of obligations and expenses and have enough left over for family support. |
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| Loan Types Requiring
Prior Approval |
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Joint Loans with someone other than spouse.
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| Loans to veterans in receipt of VA non service-connected pension
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| Loans to vets rated incompetent by VA
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VA Eligibility Center
P. O. Box 20729
251
N. Main Street
Winston-Salem, NC 27120
888-244-6711 (8:00-4:00 EST |
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| Occupancy: |
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Any person who uses entitlement on a joint loan must certify intent to personally occupy the property.
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| Any borrower on a joint loan who does not use entitlement for the loan (such as a non-veteran) does not have to occupy the property. |
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Lenders Handbook, VA Pamphlet 26-7, Revised, Change 3, Chapter 5 |
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| Energy Efficient Mortgage (EEM) |
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Loans for the acquisition of an existing dwelling and the cost of making energy efficient improvements, refinancing an existing VA loan.
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| Mortgage may be increased by:
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Up to $3000 documented costs |
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Up to $6000 provided increase in PITI does not exceed reduction in monthly utility
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More than $6000 subject to determination by VA
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| Cash Out Refinance |
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Loan Limit – up to 100% of appraised value (most lenders cap at 90% LTV)
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+ Funding Fee |
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+ cost of Energy Efficient Improvements |
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| Must payoff an existing lien(s) of record. |
| Itemization of debts paid off required. |
| Veteran can receive cash proceeds. |
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| Other Refinancing Loans |
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To payoff Construction Loans
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| Installment land sales contracts
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| Loans assumed by veterans at interest rates higher than that for the proposed refinance
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| These loans are like cash-out, except:
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| Loan amount is not limited to 90%
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| Loan may not exceed the lesser of the VA reasonable value or the sum of the outstanding balance of the loan to be refinanced
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+ allowable closing costs and discount points |
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| Interest Rate Reduction Refinance Loan (VA to VA) |
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Loan Limit = Payoff of existing first lien plus reasonable closing costs
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May be able to subordinate second loans or lines of credit |
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Minimal cash back to veteran allowed (usually up to $500) |
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| IRRRL Borrower Eligibility |
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| Parties obligated on old VA Loan |
Parties to be obligated on new IRRRL |
Is
IRRRL
Possible? |
| Unmarried veteran |
Veteran and new spouse |
Yes |
| Spouse alone (veteran died) |
No |
| Veteran alone |
Different veteran who has substituted entitlement |
Yes |
| Veteran and spouse |
Divorced veteran alone |
Yes |
| Veteran and different spouse |
Yes |
| Spouse alone (veteran died) |
Yes |
| Divorced spouse alone |
No |
| Different spouse alone (veteran died) |
No |
| Veteran and non-veteran joint loan obligors |
Veteran alone |
Yes |
| Non-veteran alone |
No |
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| Standard Documentation |
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Income claimed by applicant that cannot be verified should not be given consideration.
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| A minimum of two years employment verified. |
| VOE’s dated within 120 days of the note, 180 days for new construction.
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| Certified copy of applicant’s pays stub.
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| VOE should be compared to pay stub for consistency.
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| If in school/military during this time, borrower must provide evidence: transcripts or discharge papers.
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| Explain any gaps in employment of a month of more. No explanation required on gaps < 60 days if LP approved.
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| Click here to view The Lender's Handbook (chapter 4) and learn more >>
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| Reservists, National Guard & Active Duty Applicants |
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The Leave and Earnings Statement (LES)must identify service members who are
within 12 months of release from active duty or end of contract term.
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| Continuation of Military Allowances must be determined to count as income.
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Flight pay, hazardous duty pay, etc If cannot be determined use to offset debts of 24 months or less.
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| Leave & Earnings Statement |
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If the date is within 12 months of the anticipated date that
the loan will close, the loan package must also include one
of the following items or combination of:
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| Re-enlistment documentation
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| Valid offer of local civilian employment following release of active duty
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| Intent to re-enlist letter certified by commanding officer
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| Or Documentation of unusually strong underwriting factors such as – Down payment of 10%; significant cash reserves, and evidence of strong community ties, coupled with non-military spousal income. |
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| Notified of Mobilization |
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Lenders must recognize that activated reservists whose incomes are reduced may be unable to qualify for the loan they are seeking.
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| Ask if applicant has been notified of a mobilization of his or her unit.
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| If so, the loan must be underwritten on the basis of the projected active duty income.
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| Employment Income |
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Self-employment Income- 2 years, or
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Related Experience and/or specialized training
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| Commission Income – 2 years
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| Rental Income – 25% vacancy factor
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| Stability & Use of Income |
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12 months or longer to count as income |
| 2nd job income, only after 2 years
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Ability of working two jobs must be demonstrated
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| Overtime or Part-time – reliable after 2 years
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| Seasonal Income – document continuance
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| Unemployment compensation – not stable
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| Worker’s Compensation, Foster Care, Alimony, and Child Support - paid consistently and likely to continue
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| Public Assistance and Social Security – 3 yrs continuance
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| Credit Requirements |
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General Rule:
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| No derogatory references within last 12 months, generally = acceptable credit. Exceptions are:
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Outstanding judgments – loan cannot be approved with unpaid judgment, unless acceptable payment plan with acceptable payment history.
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Unresolved Federal debts –Must be paid in full, in non-collectible status, or on repayment plan.
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| Tri-merge Credit Report - within 60 days, 180 new construction
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| Credit History |
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Credit scores are not required, however, most lenders have their own minimum credit score requirements.
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| Non-traditional credit allowed.
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| Examples of non-traditional credit:
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Rental history |
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Utilities
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Insurance (not payroll deducted), auto, life, renters
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Auto payments paid to alternative resources
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Child Care, department stores
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| Bankruptcy |
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Chapter 13 |
| Need 12 months satisfactory payment history and approval of court.
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| Chapter 7 |
| 2 years, date of discharge, with no derogatory credit
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| Due to circumstances beyond borrower’s control, 12 month with no derogatory credit and documentation of circumstances.
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| Foreclosures & CCCS |
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Foreclosure: |
| At least two years since foreclosure completed.
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| Guidelines for bankruptcies filed under Chapter 7
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| Prior VA loans: sufficient entitlement, no unresolved debt to government
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| Consumer Credit Counseling Service
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| If entered before delinquency, a positive or neutral factor.
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One year acceptable payment history, and counselor approval
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| Assets |
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Applicant or spouse must have sufficient cash to cover:
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| Closing costs or points which are their responsibility
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| Down Payment, if less than 100% LTV
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| Difference between sales price and the loan amount, if sales price exceeds appraised value
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| VA does not require reserves
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| Liquid assets must be verified to the extent that are needed to close the loan.
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| Gift Funds |
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Gift Funds are acceptable from the following sources:
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| Borrower’s relative
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| Borrower’s employer or labor union
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| Charitable Organization
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| Governmental Agency or public entity that has a program to provide homeownership assistance |
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| Compensating Factors |
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| Excellent long term credit
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| Minimal consumer debt
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| Significant liquid assets |
| Little or no increase in shelter expense |
| Low debt to income ratio
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| Tax benefit of home ownership
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| Conservative use of consumer credit
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| Long-term employment
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| Down Payment
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| Military benefits
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| High residual income
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| Tax credits for child care |
| Equity in refinancing loans |
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| VA Residual Income |
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Monthly balance of funds available for family
support after meeting the borrowers shelter,
expenses, debts, and taxes.
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| It is calculated per the VA Loan Analysis.
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| The table of residual income figures is based
off of loan amount, region and family size.
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| Residual Income |
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| Table of Residual Incomes by Region For Loan Amounts of $ 80,000 and above
(VA Lender's Handbook 26-7, Chapter 4, Page 4-63) |
| Family Size |
Northeast |
Midwest |
South |
West |
| 1 |
$450 |
$441 |
$441 |
$491 |
| 2 |
$755 |
$768 |
$768 |
$823 |
| 3 |
$909 |
$889 |
$889 |
$990 |
| 4 |
$1,025 |
$1,003 |
$1,003 |
$1,117 |
| 5 |
$1,062 |
$1,039 |
$1,039 |
$1,158 |
| Over 5 |
Add $80 for each additional member upto a family of 7. |
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| Maintenance & Utilities |
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To be used to determine residual income and entered on line 19 of the VA Loan Analysis: |
| Calculated at 14 cents per square foot
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| Calculation is utilized in the required VA Loan Analysis
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| 1500 sq. ft. X .14 = $210
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| Child Care Expenses |
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Required on VA Purchases and any Credit Qualifying Refinance if the borrower has disclosed dependents.
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| If the Veteran has any children, then a Child Care Letter/Statement will be required.
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The child care statement must disclose who will be taking care of the children.
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Any expenses as a result of child care are included in the total debt to income ratio.
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| Non-allowable Closing Costs |
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VA does not recognize certain closing costs as charges/fees that the Veteran is allowed to pay. VA does not set a percentage of allowable closing costs, they refer to what is typical for the area.
Please refer to chapter 8 of The Lender's Handbook - click here. |
| Non-allowable costs include: |
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Administration
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Underwriting
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Processing
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Tax service |
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Courier/mail fees, etc. |
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These fees are payable by the seller or lender.
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| Seller Concessions |
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Anything of value added to the transaction by the
builder or seller for which the buyer pays nothing.
May not exceed 4% of reasonable value.
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| Power of Attorney |
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VA will allow a veteran to use an attorney-in-fact to execute any documents necessary to obtain a VA guaranteed loan.
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| Requires a general or specific Power of Attorney and written consent to transaction.
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Entitlement – clear intent to use his COE
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Purpose – obtain a loan for purchase, refinance. |
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Property Identification
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Price and terms – sales price and loan terms |
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Occupancy – intent to occupy by veteran
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| Veteran’s Status as Alive and not MIA |
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At time of closing, the lender must verify that the veteran is alive, and, if on active military duty, not missing in action.
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| Lender to Certify
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| If lender has difficulty obtaining, lender may request VA to obtain the necessary information.
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| VA may deny guaranty on a loan if a lender fails to properly verify, and veteran was deceased or MIA at the time the loan was closed.
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| Funding Fee Requirements |
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Verify status of any veteran who may be exempt
from paying the funding fee
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| Determine amount of funding fee owed by a non-exempt borrower
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| Collect the appropriate fee
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| A veteran may be exempt if he or she has a 10% or greater VA related disability.
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| VA Funding Fee |
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| VA Funding Fees – Purchases |
| Transaction Type |
Down Payment |
Military |
Reservist / National Guard |
| Initial use of entitlement |
Less than 5% |
1.40% |
1.65% |
| Second or Subsequent use |
Less than 5% |
2.80% |
2.80% |
| Initial use of entitlement or
Second or subsequent use |
5% but less than 10% |
.75% |
1.00% |
| Initial use of entitlement or Second or subsequent use |
More than 10% |
.50% |
.75% |
| VA Funding Fees – Refinances |
| Transaction Type |
Down Payment |
Military |
Reservist / National Guard |
| Initial use of entitlement |
Not Applicable |
1.40% |
1.65% |
| Second or Subsequent use |
Not Applicable |
2.80% |
2.80% |
| VA Funding Fees – Interest Rate Reduction Refinance Loan and Assumptions |
| Transaction Type |
Military |
Reservist / National Guard |
| All IRRRL’s and Assumptions |
0.50% |
0.50% |
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