VA Guaranteed Loan What Is a VA Guaranteed Loan?

 VA Guaranteed  Loan What Is  a  VA Guaranteed Loan? 


A VA-guaranteed loan can be  used to: 
•  Buy a home as a  primary residence  (This  can be  either existing  or  new construction.)
 •  Refinance an existing loan Benefits  of  a  VA  Guaranteed Loan
 •  No down payment,  unless: o  It is  required by  the  lender 
•  The purchase price  is  more  than the  reasonable  value  of  the property 
•  No mortgage insurance
 • Reusable
 One-time VA funding  fee  (can be  included in  the loan) o  If you receive  VA  disability compensation,  you are  exempt  from  the  VA funding fee 
•  Minimum property requirements o  Ensure  the property  is safe,  sanitary  and sound 
•  VA staff  assistance if  you become  delinquent  on your loan
 •  Can be  assumed by  qualified persons
 •  Equal opportunity for all  qualified Veterans Who Is Eligible? In  general,  the  following  people  are  eligible:
 •  Veterans who meet service length requirements 
•  Service members on  active  duty  who  have  served a  minimum period 
•  Certain Reservists and National Guard members 
•  Certain surviving  spouses  of  deceased Veterans Apply  at  va.gov to  determine your eligibility  or call 877-827-3702 for more information. Key Underwriting Criteria 
•  There is  no  maximum debt  ratio.  However,  the  lender must  provide compensating factors if  the  total  debt ratio  is more  than 41  percent.
 •  There is  no  maximum loan amount.
   •  VA’s residual  income  guidelines  ensure  Veteran borrowers  can afford the  loan and determine how  much  money a  Veteran must  have  left  over after  all  debts  and living  expenses  are  considered. 
•  There is  no  minimum  credit score  requirement. Instead,  VA requires  a  lender to review the  entire loan profile. 

For more information,  see the complete VA credit guidelines  at www.benefits.va.gov/warms/pam26_7.asp

How Can You Start  the  Process? 

VA provides policy,  guidelines  and oversight  of  the  program.  Lenders  provide  financing for eligible  Veterans.    

The  guaranty  allows Veterans to  obtain a  without  down payments or  mortgage  insurance  premiums.  
 Veterans need to  obtain a  Certificate of  Eligibility  (COE) to  prove  entitlement.  You can obtain the  COE  online  through va.gov.  
 Lenders  also have  the  ability  to  request  the  COE on your  behalf. April 20 20 Updated 2You should  talk  to  several  lenders  to  find  the  one  that  fits  your  needs.  
They  should know the  VA  loan program. 

 They should also  offer  competitive  rates  and terms. Note:  The  VA appraisal  is  not  intended  to  be  an “inspection”  of  the  property. 

Before  committing to  a  purchase  agreement,  you should get  expert  advice. 

 Talk  to  a qualified residential  inspection service.

  You should also  have  radon testing  performed. 

Can VA  Help If  You’re Having Trouble  Making Payments? 

VA  loan technicians  may  be  able  to  help  you  retain your  home  and  avoid foreclosure. Call 877-827-3702 to  speak to  a  VA loan technician. 



Uses for VA Home Loans?

VA Loans are intended to be used for the financing of a primary residences ONLY.
Occupancy by the spouse or dependent child satisfies the occupancy requirement if the
applicant is on active duty and not able to personally occupy the property.

Eligible Loan Purposes

• Purchase an existing or new construction single family detached home
• Purchase an existing or new construction condominium in a VA approved project
• Purchase an existing or new construction multi unit property (up to 4 units) ONLY if the applicant will be
occupying one of the properties
• Refinance an existing VA loan to lower the interest rate
• Refinance an existing mortgage or other debt secured by the property. The applicant must be occupying
the property.
• Cash out refinance to access the equity in a home occupied by the applicant.

In order to verify your credit history, your lender will obtain a credit report containing
information as reported by all 3 of the major credit bureaus: Trans Union, Equifax and
Experian.
Most people will have 3 credit scores but it is possible that you may have only 1 or
two scores if you have limited credit history.
This report will also include information on any public records such as bankruptcies,
judgments and tax liens.

Credit Scores
Credit Report

Though VA does not have a set minimum credit score requirements, lenders will have a minimum credit
score requirement.

General Credit Score Requirements

In addition to the credit scores, your actual credit history is also analyzed.
Collection account may need to be paid off in order to close your loan
It is preferable that the most recent 12 months show satisfactory payments and no other derogatory
information.
Credit History

If you experienced a major derogatory credit event, there will be waiting periods that will have to be
observed before you can be eligible to qualify for a loan.



Bankruptcy
Chapter 7
2 years from
discharge date

5 years from
discharge date

Bankruptcy
Chapter 13
Immediately after
discharge or
After 12 months of
payments***
5 years from
discharge date

Foreclosure*
2 years from
completion date

5 years from
completion date

Short Sale*
2 years from
completion date

5 years from
completion date

* If the foreclosure or short sale was on a VA loan, you may not have full entitlement available for the new loan
*** Must obtain written permission from the bankruptcy court/trustee and provide proof of satisfactory payment history
These

Income and Employment

Minimum History of Employment

A minimum of 2 year history in the same industry/line of work is required in most
instances but it’s not a universal rule.
Recent graduates can satisfy the two year requirement by providing proof of
schooling with a degree for the line of work you are now
employed in.
Active duty members do not need a two year history as
long as the minimum service requirement for eligibility
has been met.

Self employed borrowers must always have a two year history of self
employment and must show a two year history of filed tax returns to meet the
24 month requirement.

Income Calculations
If you are salaried, your base income will be used to qualify you for the loan.
However, if you are an hourly employee with varied hours, more than likely, your income will be averaged
over an extended period such as 18 or 24 months depending on the situation.
Overtime, bonuses, commission and part time employment must have a 24 history in order to be included
in the qualifying income. The income will be averaged out over 24 months. Verification of likelihood to
continue will also be required.
Non taxable income can be grossed up to account for the non-taxable status.


Debt to Income Ratios

A debt to income ratios is the percentage of your total debt obligation, including the new estimated
mortgage payment, all debts shown on your credit report, as well as alimony, child support etc, as
compared to your gross qualifying income.
EXAMPLE

The rule of thumb is that your debt to income ratio should not exceed 50% of the usable, gross monthly
income. However, higher percentages can be approved.
In addition to the debt to income ratio requirements, VA also has residual income requirements. VA residual
income looks at how much income is available after all monthly liabilities, including tax withholdings,
utilities and child care, are accounted for.

Residual Income By Region
For loan amounts of $80,000 and above
Family
Size

Northeast Midwest South West
1 $450 $441 $441 $491
2 $755 $738 $738 $823
3 $909 $889 $889 $990
4 $1025 $1033 $1033 $1117
5 $1062 $1039 $1039 $1158
over 5 Add $80 for each additional member up to a family of

seven
2400/5000= 48%

Deferred student loans
If student loan repayments are scheduled to
begin within 12 months of the date of loan
closing, the anticipated monthly payment will
be included.
If you are able to provide evidence that the
loan(s) will be deferred for a period outside
that time frame, the payment will not be
included.
Qualifying income: $5000
New mortgage payment: $2000
All other obligations: $400

Monthly debt payments
The payments shown on
your credit report will be
used to qualify you. If the
payments are incorrect,
you will be asked to
provide proof of the correct
payment.

Co-signed loans
If you co-signed for someone on a loan and
that loan is showing on your credit report, the
payment will be included in the ratios unless
you are able to provide evidence that the other
person on that loan has been making the
monthly payments from an account that you
are NOT a co-owner on.

Alimony/child support
You will be expected to
truthfully declare that
you pay alimony or child
support. You will be asked
to provide your divorce
decree and/or child support
order to verify the amounts.

Non-purchasing spouse
You should be aware that if you purchasing a home
in a community property state such as California
and are married, your spouse’s credit report will be
required. His/her debts will be included in the ratio
calculations even if he/she is not going to be on the
purchase or loan.


Documentation Checklist
The following is a general list of documentation required for a home loan application.

Not all items will apply to your situation

F DD214 if not active duty or Statement of service if active duty

EMPLOYMENT/INCOME

F Pay stubs (LES) for the most recent 30 days available
F W-2's for the previous two years
F Federal tax returns for the previous two years. All pages and schedules must be included
F If self-employed, provide all pages and schedules of last two years’ business tax returns and
corporate K-1's
F Award letter for Social Security benefits, disability or Pension
F Proof of receipt of child support, alimony or any other non-employment source of income

ASSETS

F Provide ALL pages of most recent 2 months’ statements for all accounts; including all checking, savings,
stocks, IRA, 401k, etc. The statements must show your name, account number and the name of the
banking institution. Any non-payroll deposits will have to be explained and documented.
F If funds to close will come from a gift, complete the gift letter (will be provided to you) and the following:
F From the donor - bank statements showing the funds in the donor's account and a copy of the check
from the donor's account
F From you - a copy of the deposit slip showing the gift check deposited into your account
F If funds to close are from sale of home
F Estimated closing statement showing anticipated proceeds
F Copy of final closing statement and deposit slip showing proceeds deposited into bank account

PROPERTY
F Select your insurance agent and provide agent's name, address, and phone number
F If refinance, or if you will be retaining your current home or own other property
F Current mortgage statement
F Copy of insurance declaration page
F If you’re currently renting, provide your Landlord’s name, phone number and address.
F 12 months canceled rent checks will be necessary