Questions and Answers for VA Loans

Do you have questions regarding VA Loans? Check out the many Questions and Answers for VA Loans below.

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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.

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?

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 VA loan, a veteran must apply to a lender. If the loan is approved, 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 VA loan but lenders will generally limit VA loans to $359,650. This is because lenders sell VA loans in the secondary market, which currently places a $359,650 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.

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Why do I have to pay a fee for a VA home loan?

The VA funding fee is required by law. The fee, currently two percent (2%) 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 three percent (3%). 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.

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Since I paid a fee for my first loan, why is there a larger fee for my second loan?

Second time users who make a down payment of at least 5 percent pay a reduced funding fee of 1.5 percent, the same as first time users making the same down payment. For a 10 percent down payment, the fee drops to 1.25 percent. The effect of the funding fee on a veteran's financial situation is minimized since the fee may be financed in the VA loan.

May a veteran join with a non veteran who is not his or her spouse in obtaining a VA loan?

Yes, but the guaranty is based only on the veteran's portion of the loan. The guaranty cannot cover the non veteran's part of the loan. Consult with a mortgage company 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.

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If you need down payment guidance for your first time home buyer VA loan, be sure to check out grants for your state or our down payment assistance pages. I've included lots of information to help you.

Also, I've incorporated tons of information to help you if you need to improve your credit. Take time to explore that whole section of my website if you need that kind of help.