Purchase Options

va loans

The VA Loan is a government-sponsored mortgage backed by the U.S. Department of Veteran Affairs (VA) and offered through VA-approved lenders. The most notable benefits of the VA Loan include no down payment, no mortgage insurance, flexible underwriting requirements, streamlined refinancing, and often a lower-than-average interest rate.  

VA Loan Eligibility. 

 VA Loans are available for active-duty military, Veterans, reservists, National Guard, and surviving military spouses. To apply, applicants must meet the following requirements:

  • Proof of Verifiable Income and Employment History.  Applicants must be able to prove sufficient income to support the proposed house payment and other qualifying debt (see DTI requirements below).  In most cases, a two-year history of employment is also required.  There are a few instances where the two-year employment requirement is not needed (such as an individual who just graduated from school, a retiree or someone whose income is derived from disability).
  • A Minimum Credit Score of 620.  While the VA has no minimum credit score, different lenders have different minimum credit score requirements.  
  • Down Payment Requirement.  The VA Loan is one of two home loans that doesn’t require a down payment (the other being a USDA Loan). If the purchase price does not exceed the home’s appraised value, you can get up to 100% financing.
  • Debt-to-Income Ratio (DTI) Requirement.  The maximum allowable DTI for a VA loan is 41%.  Keep in mind, your DTI is calculated by totaling the minimum payments on all your recurring monthly debts (student loans, credit card and installment payments, as well as your new proposed house payment), divided by your monthly gross income – expressed as a percentage. For example, if your new house payment is $1,800 per month, your car payment is $529 per month, and your minimum monthly credit card payment is $315, your total monthly debt is $2,644. If your gross income is $6,000 per month, then your DTI is roughly 44% (2,644 ÷ 6,000 = 44.06).
  • Mortgage Insurance Requirement.  Typically, when you put less than 20%* down on a home, you are required to pay mortgage insurance, in the form of upfront and ongoing mortgage insurance premiums. The VA loan requires no mortgage insurance; however, a VA Loan does include a one-time Funding Fee. This fee helps to lower the cost of the loan for U.S. taxpayers since the VA home loan program doesn’t require down payments or monthly mortgage insurance.  This fee ranges between 1.4% and 3.6% of your loan amount and can typically be rolled into the loan or paid in full at closing. There are certain exemptions to the VA funding fee, such as Veterans who are receiving compensation for a service-related disability, active-duty service members who have received the Purple Heart, and more. 
  • Eligible Properties.  Homes financed or refinanced with a VA Loan must be a 1 – 4-unit primary residence. Condos and townhouses are also eligible for VA financing, but they must be in a community that is approved by the VA. If you choose to use your VA Loan benefit to finance a manufactured home, it must be on a permanent foundation and sold with land. VA Loans cannot be used solely to purchase land however, they can be used to finance new construction. Additionally, eligible properties will have to pass a VA Loan appraisal and meet the Department of Veterans Affairs’ minimum property requirements (MPRs), which are in place to help protect borrowers.

Applying for an VA Loan 

It’s easy. To get started, you will want to gather the following (that applies to you):

  1. Certificate of Eligibility.  Request a COE on eBenefits.
  2. Proof of income and employment (pay stubs, tax returns, W-2 statements, retirement statements Social Security statements, child support and alimony documentation etc.)
  3. Documentation of financial assets (bank statements, 401k statement, document of income from investments, etc.)
  4. Most recent two Residential history (Name and Contact information for current landlord, etc.)
  5. Identity information such as your unexpired Driver’s License and Social Security card. 

If you have questions and would like to speak to someone, give us a call at 832.946.8400.

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