Purpose For VA Loans Is To Promote Home Ownership To Veterans
This BLOG On Purpose For VA Loans Was Updated On November 25th, 2018
The purpose for VA Loans is to promote homeownership to members of the U.S. Military who served in the U.S. Armed Services.
- The federal government purpose for VA Loans and its creation was to reward our men and women in uniform who served both in wartime and peacetime
- In order to qualify for VA Loans, the veteran needs a valid Certificate of Eligibility from the U.S. Department of Veteran Affairs
- Not all members who served in the United States Military qualify for VA Loans
- In order to get awarded with a COE (Certificate of Eligibility)
- There are certain requirements in order to qualify
In this article, we will discuss and cover VA mortgages.
VA Loan Program
There is so many benefits of VA Loans.
- VA Loans is hands down the best mortgage loan program for any home buyer
- However, not every home buyer qualifies for VA Loans
- To qualify, the home buyer needs to be a Veteran of the U.S. Military
They need to have served a certain amount of time to get awarded with a Certificate of Eligibility which is the main ticket to get a VA home loan.
VA Eligibility Requirements
Here are the VA Loan Program requirements:
- 100% Financing
- Department of Veteran Affairs allows home sellers to offer up to 4% in sellers concessions to the veteran home buyer to use it for closing costs
- A veteran home buyer does not need any money to purchase a home
- No down payment requirement
- Closing costs can be covered with either a sellers concession or lender credit by the mortgage company
- VA does not have any credit score requirements
- Gustan Cho Associates can originate and fund VA Loans down to a 500 credit score
VA does not have debt to income ratio requirements:
- Borrowers can get an approve/eligible per AUS Findings with a 60% debt to income ratio
- This holds true as long as they have strong Residual Income
VA Loans are for owner-occupied homes only:
- Veterans can purchase a one to four-unit owner occupant home with a VA Loan
- Collections and charge off accounts do not have to be paid off to qualify for VA Loans
Qualifying For VA Loans With Bad Credit And High DTI
The purpose for VA Loans is to reward our veterans who served in the U.S. Military with a Certificate of Eligibility for their service.
- Being eligible for a VA Loan is one of the greatest benefits a veteran can ever get for their duty in serving in our military
- Since the purpose for VA Loans is to promote homeownership for veterans, the VA Guidelines are very generous with regards to credit and debt to income ratios
- VA Loans is one of the easiest home loan programs in the country
- The U.S. government realizes that many veterans have bad credit due to not being able to pay their bills on time due to their deployment
- Many times veterans get transferred from one location to another and may be late on paying their monthly debts timely
- VA Loans has much lenient Mortgage Guidelines than FHA Loans
However, most lenders have tougher lending requirements on VA Loans due to lender overlays.
VA Guidelines On Bankruptcy And Foreclosure Versus FHA Loans
Here is the comparison on VA Loans Versus FHA Loans in qualifying for a mortgage after bankruptcy and foreclosure:
- VA and FHA both require 2 year waiting period after Chapter 7 Bankruptcy to qualify for a mortgage
- Borrowers can qualify for VA and FHA Loans one year into their Chapter 7 Bankruptcy repayment period
- This holds true as long as they can get approval from Chapter 13 Trustee
- Provide 12 months of timely payments
- There is no waiting period to qualify for both VA and FHA Loans after Chapter 13 Bankruptcy discharged date
- Waiting period is 2 years after the recorded date of foreclosure and deed in lieu of foreclosure to qualify for VA Loans versus FHA where HUD requires 3 year waiting period
- Waiting period is 2 years after the short sale date of a prior short sale to qualify for VA Loans versus FHA where HUD requires a 3-year waiting period to qualify for FHA Loans
Deferred Student Loans
VA will waive deferred student loan payments if the student loans have been deferred for 12 or more months.
Non-deferred student loans, here is how VA Guidelines works:
- Take 5% of the outstanding student loan balance
- Divide that figure by 12 months
- The resulting figure is the hypothetical student loan payments used on VA Loans
FHA used to waive this but no more.
With FHA, all deferred student loans need to be calculated either by:
- Taking 1.0% of the deferred student loan balance and using that as a monthly payment or;
- Getting a statement from the student loan provider on a proposed amortized monthly student loan payment on an extended payment plan
Conventional Loans allow Income-Based Repayment as long as the IBR Payment reports on all three credit bureaus.
Student loans are one of the biggest obstacles due to the large monthly payment amount when it comes to qualifying for a mortgage.
Co-Borrowers And Non-Occupant Co-Borrowers
One of the disadvantages with VA Loans is that the Department of Veteran Affairs will only allow veteran home buyers to have their spouse as co-borrowers.
- Non-occupant co-borrowers are not allowed with VA Loans like it is with FHA Loans
Benefits Of VA Loans
VA loans are priceless benefits that veterans of the U.S. Military have.
Here are the benefits of VA Loans:
- Zero down payment required; 100% financing
- No annual mortgage insurance premium like FHA Loans
- There is a VA Funding Fee like FHA has the upfront FHA MIP
- The VA Funding Fee is rolled into the VA Loan Balance so the veteran does not have to come out of pocket
- With a VA loan, you have the 2.125% VA upfront funding fee but you do not have any monthly mortgage insurance premium
- VA upfront funding fees are waived for disabled veterans
Again, the purpose for VA Loans was for our government to reward our veterans who put in the required service in the U.S. Military become homeowners with no money out of pocket and less than perfect credit. Gustan Cho Associates specializes in originating and funding VA Loans with no lender overlays. Veterans who need to qualify for VA Loans, contact us 262-716-8151 or text us for faster response. Veterans can also email inquiries to [email protected] We are available 7 days a week, evenings, weekends, and holidays.