If you’re one of those lucky home buyers that is eligible for the VA home loan program, congratulations. As a result of your service you have access one of the best financing option offering 100% financing with no mortgage insurance. If you’re eligible and want to know more about the VA home loan program, here are some of the general guidelines approved VA lenders use when evaluating a VA home loan application.
Employment– VA home loans ask there be at least two years of employment be verified. The most common form of verification is the most recent two years of W2 forms. The lender may also contact the employer directly to verify income, employment status and length of employment. For those that are self-employed, VA guidelines require at least two years of self-employment along with the most recent two years of federal income tax returns. Newly discharged service members can provide a statement of service verifying at least two years of service.
Income– Approved VA lenders will verify income by reviewing your most recent pay check stubs covering 30 days in addition to your W2 forms. Self-employed borrowers will be required to provide a year-to-date profit and loss statement in addition to the two most recently file federal income tax returns. Self-employment income must be consistent from one year to the next with no significant drop-off.
Assets– Although there is no down payment required with a VA home loan there are closing costs associated with a VA home loan. The VA charges a Funding Fee which is expressed as a percentage of the loan amount based upon the terms of the VA loan as well as considering if the veteran has used the VA loan before. For first time buyers the funding fee is 2.15% of the loan amount but is rolled into the final loan and does not have to be paid for out of pocket. There will be additional fees for lender and third party services, but these costs can be paid by the home seller. Sufficient assets to close will be verified with recent bank statements or a Verification of Deposit form submitted to the veteran’s bank.
Closing Costs– The veteran is limited to the types of closing costs that are paid. Typically these charges are lender fees such as an underwriting charge, a processing fee or an attorney fee. Closing costs that are considered allowable include fees for an appraisal, credit report, title insurance origination fees, recording charges and a survey or abstract where required. Closing costs can be paid for by the veteran, the seller or the lender using a lender credit.
Credit– While the VA does not require a specific minimum credit score, most VA lenders require a minimum credit score of 620. Lenders request both a credit report and credit scores from all three main credit repositories, Equifax, Experian and TransUnion. Of these three scores, the lender will throw out the highest and lowest and use the middle score as the qualifying number.
Whether you’re buying a home in Cleveland or anywhere in Cuyahoga County and you’re eligible for a VA home loan, it’s important to speak with a loan officer experienced with the VA program. While the VA loan is very much like other loan programs they are processed a bit differently so it’s important to work with someone that has experience processing and approving VA loan applications. If you have a sizable down payment then perhaps you should consider other options but if you want a loan that does not require a down payment yet still offers competitive rates you need look no further than the VA home loan program.
Keep in mind VA offers some fantastic streamline refinance options for those Vets that already have a VA loan and want to look into reducing their interest rate. Limited documentation and no appraisal make the program easy. VA also offers cash out refinance options up to 100% loan to value.
Vets in search of larger loans can learn more about the VA Jumbo Mortgage here.
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