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VA Loan FAQs
Question
How much military service is required to qualify for a VA loan?
Answer
The VA has pages of material attempting to answer that question, but generally speaking, you need to have served on active duty for at least 90 days during wartime or 181 days during peacetime. If, however, you entered the service after 1980, the minimum requirement is 2 full years of active duty. Members of the Reserves and National Guard become eligible after 6 years of service. The other major consideration is that you were not dishonorably discharged.
Question
When is a VA loan NOT appropriate for a veteran?
Answer
In the case of a high sales price, such as $300,000 or more, where you are charged the full prior-use VA funding fee of 3.30%. That could cost you more than $10,000, so you may be better off with a conventional program if you have strong credit, but this is not always the case. That decision requires a financial analysis and comparison by our office. Other times would be if you already have an active VA loan that you are not going to be paying off before getting your new loan. Most of the time, the VA program will be the best option if you qualify.
Question
Are there income limitations or loan amount limits on VA loans?
Answer
There are no income limitations on the high end, but there are limitations on the lower end. The VA has something called a “residual income” requirement to ensure that you and your family have enough money left over each month after paying all your debt and housing expenses. So even with a good credit score, some veterans are denied financing or simply not pre-approved due to the “residual income” calculation.
There are no loan amount limits for VA loans, however, as of January 2006, the max loan amount without a down payment was $417,000. Over that amount, you would typically have to put down 25% of the overage. So, the required down payment on a $517,000 house would be $25,000. This assumes you have full eligibility for the VA program.
Question
On average, how long does the process take to get a VA loan?
Answer
The process for a VA loan takes the same amount of time as a Conventional loan, with two exceptions. First, if the VA loan is being processed by a loan officer who is not familiar with the many nuances of the VA home loan program, it will most certainly take longer to process and close the VA loan. The second instance is when the veteran does not have a Certificate of Eligibility and one is not immediately available through the lender or our local VA clinic. This happens perhaps 5% of the time, and requires that the lender assist the veteran in obtaining one by mail. Currently that process is taking about 3 weeks, so that could potentially delay the VA home loan process as the COE would be needed prior to submitting the complete loan package to underwriting.
Question
Does the VA program offer different mortgage options such as interest only payments?
Answer
Yes, the VA program does have several mortgage options; however, as of May 2006, the VA does not offer interest only mortgages. What they do offer is 10 to 30 year term options and a 3-yr ARM.
Question
Do VA loans always require escrows for taxes and insurance?
Answer
The VA does not currently require an escrow account for VA loans; however, many lenders do. Typically if the VA loan is the best fit for the buyer, having an escrow account will probably be as well. Question
What are the rules for receiving interest-free mortgages while on active duty or in combat?
Answer
The Service Members Civil Relief Act protects all active-duty military families from foreclosures, evictions and other financial consequences of military service. The relief act provides a broad spectrum of protections to service members, their spouses and their dependents. The interest rate on debts incurred before enlistment, for example, must be capped at 6 percent if military duty has reduced a service member's family income. The law also protects service members from repossession or foreclosure without a court order. It allows them to terminate any real estate lease when their military orders require them to do so. And it forbids judges from holding service members in default on any legal matter unless the court has first appointed a lawyer to protect their interests. The Texas Vet Land Board's Housing Assistance Program has an interest-free policy for Reservists and National Guard members who are activated.
Question
Do you have to be on active duty to receive special privileges?
Answer
If this question is referring to the VA home loan benefits, then the answer is No. Once you’ve earned eligibility, you can use the benefits anytime in your lifetime, whether you are currently on active duty, discharged, or retired military. Once you earn your eligibility, it does not go away.
Question
What are the requirements to qualify for a VA loan?
Answer
After eligibility is determined (based on military service) then we look at several things to determine qualification. The first is your credit score and your spouse’s credit score if he/she is also going to be on the loan. We must use the lowest credit score for the program. There is no specific VA credit score minimum, but the type of derogatories (late payments, charge offs, etc.) can be an issue. For instance, tax liens and judgements usually need to be paid off or shown to be released. Another consideration is your employment history. The veteran and any co-borrowers need to show at least 2 years of consistent employment, preferably in the same industry or type of work. Then we consider the total household debts compared to total household income to determine the debt-to-income ratio. Under 40% is best, but we’ve gone as high as 60% in special circumstances. In summary, credit scores, employment history and income, and the debt-to-income ratio are the major determinants of VA qualification, although many other factors are considered.
Question
Do you only work with veterans?
Answer
No. Our clients refer friends and family members and our real estate partners refer clients with and without military service backgrounds. We serve all of them equally; however, when someone needs a VA Specialist, we are usually the first on the list. Also, sometimes a veteran will not be eligible or not qualify for the VA program, so we have Conventional programs for them as well.
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