Can I get a Kentucky VA loan if I have had a bankruptcy in the last few years?
Kentucky VA credit standards state that a veteran with a bankruptcy less than 3 years ago would generally not be considered a satisfactory credit risk unless: the veteran or spouse has obtained items on credit since the bankruptcy and has paid the obligations in a satisfactory manner for a continued period; and the bankruptcy was caused by circumstances beyond the control of the borrower, which would have to be verified. A bankruptcy discharged 3 to 5 years ago must be given some consideration in the underwriting of the loan. A bankruptcy discharged more than 5 years ago may be disregarded. These are the minimum standards that mortgage companies must follow when making a VA loan. In 95% of the cases, companies make the decision to approve a loan without VA's prior approval. Keep in mind that mortgage companies also have money at risk in giving you a VA loan, so they may have stricter credit standards than those mandated by VA.
How large of a loan can I get? If my guaranty entitlement is $36,000, does this mean I am limited to a $36,000 loan?
Kentucky VA guaranteed loans are made by private lenders, such as banks, savings & loans. or mortgage companies to eligible veterans for the purchase of a home which must be for their own personal occupancy. To get a loan, a veteran must apply to a lender. If the loan is approved, KY VA will guarantee a portion of it to the lender. This guaranty protects the lender against loss up to the amount guaranteed and allows a veteran to obtain favorable financing terms. There is no maximum KY VA loan but lenders will generally limit VA loans to $424,100. This is because lenders sell VA loans in the secondary market, which currently places a $424,100 limit on the loans. For loans up to this amount, it is usually possible for qualified veterans to obtain no down payment financing. A veteran's basic entitlement is $36,000 (or up to $89,912 for certain loans over $144,000). Lenders will generally loan up to 4 times a veteran's available entitlement without a down payment, provided the veteran is income and credit qualified and the property appraises for the asking price.
Why do I have to pay a fee for a Kentucky VA home loan? Since I paid a fee for my first loan, why is there a larger fee for my second loan?
The VA funding fee is required by law. The fee, currently 2.15 percent on no down payment loans, is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a down payment is 3.30 percent. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment. The effect of the funding fee on a veteran's financial situation is minimized since the fee may be financed in the loan.
May a veteran join with a non veteran who is not his or her spouse in obtaining a Kentucky VA loan?
Yes, but the guaranty is based only on the Kentucky veteran's portion of the loan. The guaranty cannot cover the non veteran's part of the loan. Consult mortgage companies to determine whether they would be willing to accept applications for joint loans of this type. Mortgage companies that are willing to make these types of loans will likely require a down payment to cover risk on the non guaranteed, non veteran's portion of the loan. Unlike other loans, the mortgage company must submit joint loans to VA for approval before they are made. Both incomes can be used to qualify for the loan. However, the veteran's income must be sufficient to repay at least that portion of the loan related to the veteran's interest in (portion of) the property and the non veteran's income adequate to cover the rest.
How do I apply for a Kentucky VA guaranteed mortgage loan in Kentucky?
You can apply for a Kentucky VA loan at any mortgage company that participates in the VA home loan program. At some point, you will need to get a Certificate of Eligibility from VA to prove to the mortgage company that you are eligible for a VA loan.
How do I get a Certificate of Eligibility for a KY VA Home Loan?
A copy of the form can be obtained by calling your local VA office. Send your paperwork to any VA Regional Office. You must include a copy of your certificate of release or discharge from active duty with the proper forms. If you are on active duty, you must submit a statement of service signed by, or by direction of, the adjutant, personnel officer, or commander of your unit or higher headquarters showing date of entry on your current active duty period and the duration of any time lost.
I have already received one Kentucky VA loan. Can I get another one?
Yes, depending on the circumstances. If you have paid off your prior VA loan and disposed of the property, you can have your entitlement restored for additional use. To obtain restoration of entitlement, you must contact your local VA office and submit the proper form, along with evidence that the property has been disposed of and the loan repaid in full. This evidence can be in the form of a payoff statement from the former mortgage company, or a copy of the HUD-1 settlement statement completed in connection with the sale of the property. The application can be presented to any VA Regional Office. A veteran can also obtain restoration of entitlement, on a one time basis, if the prior VA loan has been paid in full but the property has not been sold.
I have sold the property I obtained with my prior VA loan on an assumption. Why can't I get my entitlement restored to purchase a new home?
In this case your entitlement can be restored only if the assumer is also an eligible veteran who is willing to substitute his or her entitlement for that of your original entitlement. Otherwise, you cannot have entitlement restored until the assumer has paid off the VA loan.
My prior VA loan was assumed, the assumer defaulted on the loan, and VA paid a claim to the mortgage company. VA said it wasn't my fault and waived the debt. Now I need a new VA loan but am told that I am not eligible. Why not? or My prior loan was foreclosed on, or I gave a Deed in Lieu of Foreclosure, or VA paid a compromise claim. I was released from liability on the loan and/or the debt was waived. Can I get another VA loan?
Although your debt was waived by VA, the government has still suffered a loss on the loan. The law does not permit your entitlement to be restored until the loss has been repaid in full.
Do Kentucky VA Loans Require a Minimum Credit Score?
- While it’s true that the VA does not require a minimum score
- Lenders typically impose their own minimums to ensure default rates aren’t high
- That means in the real world you might need a 620 or 640 FICO score
- Though some brave lenders will accept credit scores down to 500
Aside from not needing a down payment, there isn’t a minimum credit score requirement for VA loans.
However, this doesn’t mean you can get a VA loan with a 400 FICO score. Or even a 500 FICO score in most cases.
Many lenders that originate VA loans still impose their own minimum credit score, such as 620, 640, or higher. So it can be somewhat misleading to say they don’t have a minimum requirement.
The VA is happy to say approve any loan you want credit score-wise, but will penalize lenders that exhibit high default rates. As such, VA lenders will take steps to ensure credit quality is in line with industry norms.
That means you probably won’t be able to get a VA loan with a score below 620 in most cases, though there are some lenders will go into the mid-500s or sometimes 500.
However, you should still do your best to stay on top of your credit if you want the lowest mortgage rate possible, regardless of which loan program you choose and whether you can get approved with a lower score.
Sure, you might be approved, but it could cost you big over the years in significantly higher interest costs. Why not take the time to address your credit before applying for a home loan?
Benefits and Advantages of Kentucky VA Loans
- No down payment required
- Low closing costs
- Low mortgage rates
- High loan limits
- Low credit score requirements
- No mortgage insurance
VA loans come with a number of benefits and advantages that can make them a solid choice above conventional options. Let’s take a look at some common Q&A.
Do VA loans require a down payment?
No. Perhaps the biggest advantage is the lack of a down payment requirement, which was previously mentioned. You can get VA mortgages for 100% LTV.
Do VA loans require private mortgage insurance?
Finally, VA loans do not require you to pay mortgage insurance, private or otherwise, which can obviously increase the cost of the monthly mortgage payments and the overall cost of your mortgage.
However, the VA does collect a funding fee (unless you’re exempt), which insures your loan against default and protects the originating lender. So in a sense you’re still paying insurance for the loan.
The good news is it can be paid at closing or rolled into the loan amount.
Do VA loans allow co-signers?
Yes, but it depends on the situation. If the co-signer is your spouse or a veteran, there are no special requirements. But if the co-borrower is not your spouse or a member of the military, a down payment of 12.5% may be needed (this is calculated by using half of the 25% VA guaranty).
Do VA loans cover manufactured homes?
This always seems to be a popular mortgage question, regardless of loan type. The short answer is yes, you can use a VA loan to buy a manufactured home and/or lot. However, the trick is finding a lender out there willing to provide VA financing for a manufactured home.
So it’s a yes according to VA eligibility, but a maybe in terms of finding a lender willing to extend the loan. In short, it might require a bit more legwork to track down someone willing to offer the financing.
Do VA loans require an appraisal?
If purchasing a home with a VA loan, an appraisal will be required. This is for your protection too to ensure the home is worth what you’ve agreed to pay for it.
An appraisal is also required if you’re attempting to pull cash out of your home. Conversely, if you’re simply looking to reduce your mortgage rate via an IRRRL, no appraisal is required.
Do VA loans require an escrow account?
The VA does not require lenders to maintain escrow accounts, though most impose them to ensure borrowers have the necessary funds to pay hazard insurance and property taxes in a timely manner.
In other words, the VA doesn’t explicitly require escrow accounts, but the lender you ultimately work with probably will, so there’s not much way around it. Additionally, there is typically a fee to waive escrows, so it might be cheaper just to escrow.
Do VA loans require reserves?
No, VA loans do not require reserves, which is another plus. However, if the property being financed is a multi-unit property and you’re using rental income to qualify, six months PITI will be required for reserves.
Additionally, those with non-traditional or insufficient credit may be required to provide reserves.
Do VA loans have prepayment penalties?
No again. So you don’t have to worry about being penalized for paying off your loan early or refinancing it away from the VA.
In summary, if you feel you meet the eligibility requirements for a VA loan, be sure to include this loan in your mortgage search. You may find that another type of home loan is more beneficial, but you should compare all options to be absolutely certain.
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
Company ID #1364 | MB73346
If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant's eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant Equal Opportunity Lender. NMLS#57916
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