VA financing is one of the best mortgage products available in the market today, as the VA makes it easy for their members to refinance or purchase a home with zero down financing and No monthly mortgage insurance. This list of VA frequently asked questions and VA tips will help you understand the in-and-outs of how the VA mortgage program works. I also included 6 tips below too that you can use to help get a VA purchase offer accepted.
A VA Loan is one of the Best Mortgage Programs Available
The VA program saw its biggest year ever in 2016, according to a report in the US Finance Post. Loan volume nearly doubled from five years before, with the VA backing more than 707,000 loans. And homeownership among veterans is looking good – especially compared to the wider public. The national homeownership rate has fallen to below 63%, a half-century low. Meanwhile, according to VA estimates, the homeownership rate among veterans is around 82%.
With VA mortgage rates still around 3.5% on a 30-year fixed, the cost of financing a home with a VA loan is still near all time lows.
VA Loan Frequently Asked Questions
Here is a list of the most frequently asked questions that VA buyers and homeowners have about VA financing. I also included 4 tips below too that will help a VA buyer get their purchase offer accepted.
Who is eligible for VA financing?
A veteran is eligible for VA financing if he/she served on active duty in the Army, Navy, Air Force, Marine Corps, or Coast Guard and was honorably discharged after 24 continuous months of active duty, or the full period for which called, or ordered to active duty, but not less than 90 days (during wartime) or 181 continuous days (during peacetime).
Can VA Buyers Purchase With $0 Down?
Yes, VA buyers can get 100% financing here in San Diego to $500k? VA financing is still the only loan program that allows 100% financing in any area (FYI the USDA allows 100% financing, but this is strictly for rural properties).
We can also give a VA buyer a 3% lender credit to cover ALL their closing costs. This means a VA buyer can purchase a home with No down payment due or closing costs either, and they will only have to pay for the appraisal fee out of pocket. Make sure to ask me how you can qualify for this lender credit towards closing costs too.
As the FHA still requires a 3.5% down payment, and most conventional loan programs require down payments anywhere from 5% to 20% depending on the credit profile of the buyer, this is still putting home ownership out of reach for many buyers.
What is the Minimum Credit Score to Qualify For VA Financing?
Most VA lenders only need a 620 credit score to offer 100% VA financing. I have 2 VA lenders that will offer 100% financing with a 580 credit score. Also some VA lenders allow a buyer to qualify up to a 57% debt to income (DTI) ratio on VA loans, Fannie Mae is now capped at 45% in most cases.
Most banks have easier qualifying and credit guidelines for VA buyers. Because many first time buyers typically don’t have a lot of established credit, getting qualified for a conventional loan can be more difficult.
Do VA Buyers Pay Any Monthly Mortgage Insurance?
Another huge advantage for VA buyers is that they do not have to pay any monthly mortgage insurance (MI) on their loans, as VA loans are backed by the government. Remember all FHA loans require mortgage insurance. So having no monthly mortgage insurance allows VA buyers to have a lower monthly mortgage payment or purchase a bigger home.
What is the Maximum VA Loan I can Qualify For?
The VA offers financing based on county loan limits. For example, the VA offers 100% financing up to $612,950 for buyers in San Diego, and $636,150 for LA county and Orange County, and $424,100 for Riverside county. You can check your county loan limit by clicking HERE
*To borrow over the county loan limit, (which would be > purchase price of $612,950 in San Diego), there is a formula the VA uses to calculate what a VA buyers down payment requirement is. Feel free to contact me if you have a VA scenario and you want to calculate what the down payment requirement is.
What is a VA Streamline Refinance?
A VA streamline Refinance is the best refinance program in the market. This program allows a homeowner with an existing VA loan refinance into a new VA loan with no appraisal or income requirements.
Because you already have a VA loan, the VA allows you to refinance your current loan balance into a lower rate with very limited documentation so you can take advantage of lower rates and save extra money :). It is a fantastic program available only to VA members. Ask me for more details how to qualify for this program
With current VA mortgage rates around 3.5% on a 30 year fixed, this leaves VA loans near the the cheapest they have ever been in history. Ask me for more details how to qualify for this VA streamline refinance program.
How Are VA interest Rates Compared to Other Loan Programs?
VA mortgage rates are usually the lowest in the industry and are typically .375% lower than conventional rates. *Make sure to ask me how we can cover ALL your closing costs with our VA lender credit option.
Because the VA insures the loans for their members, they are able to offer lower rates to buyers.
What is the VA Waiting Period after a Foreclosure, Short sale or Bankruptcy?
Short Sale: It is only 2 years before a buyer can repurchase again using VA financing.
Foreclosure: It is only 2 years before a buyer can repurchase again using VA financing.
Bankruptcy: For a chapter 7 Bankruptcy it is 2 years and 1 year for a chapter 13, before a buyer can repurchase again using VA financing.
Can I Buy an Investment Property With VA?
No, you can only purchase a primary residence using VA financing, no second or vacation homes either. But if you already own a home with VA financing on it, you can qualify again to purchase a new home with a VA loan.
The misconception sellers have about VA closing costs
There is a misconception out there that the seller must pay for some or all of a VA buyer’s closing costs. The seller is NOT required to pay ANY costs for the buyer, but is allowed to pay up to 4% for VA loans.
But there are certain “VA non-allowable” costs for which a VA buyer is forbidden to pay, (for example No escrow fees, wiring, notary, tax service or processing fees are allowed to be charged).
Here is a good tip to help get a VA offer accepted, so this issue of who covers these VA non allowable fees does not become an issue. It is advised that the following language be inserted in to the purchase contract, so the seller is not put off by the VA offer: “Seller not responsible for any buyer closing costs, regardless of the selected loan program. All agency-related “non-allowable” costs to be borne/paid by lender”.
This means the VA Non-Allowable fees will be paid by a lender credit instead of the seller, we do this for all our VA buyers. So now the seller will NOT dismiss the VA offer right away, does NOT have to cover any closing costs, negotiations are easier, and the buyer and seller can strike a deal.
6 Tips to Help Get Your VA Purchase Offer Accepted
Here are 6 tips to help a VA buyers purchase offer get accepted. I also wrote an article for the San Diego Union Tribune discussing VA financing and some tips for buyers, you can view the article HERE
1. Submit a personal letter to the seller with your offer
It is a good idea for a veteran to submit a personal letter with their purchase offer, and to tell the seller why they want to buy their property. Because if you can tug at the heart strings of the seller, then they may be more apt to choose your offer over others! There will be some sellers who will take great pleasure in having the opportunity to help our veteran families.
2. Include a VA DU underwriting approval with your offer
Include a VA DU underwriting approval with your offer. A DU (desktop) underwriting approval is when a buyer’s loan application and credit report has been ran through the VA’s automated underwriting systems and was approved.
A DU underwriting approval displays the most important information on a buyer’s profile, which gives the seller a better idea of the strength of the buyer. For example, a DU approval displays a buyer’s credit scores, debt to income ratios, assets, reserves, any applicable down payment and the type of loan program they are approved for.
3. Provide proof of reserves/assets/down payment funds to strengthen offer
The zero down payment requirement with VA means less skin in the game. We can’t argue with this because VA allows 100% financing, so this does amount to very “little skin in the game” from a buyer.
Therefore it’s a good idea to include proof of reserves and assets and any applicable down payment funds along with your offer, so this shows the seller the buyer has applicable funds to close if any additional funds are needed to close the transaction.
4. Increase your deposit
Want to show a seller how serious your offer is? Consider putting down a bigger deposit in earnest money. This may seem risky for some, but earnest money is there for a reason. If you are uncertain about putting a “noticeable” amount of earnest money on the table, it may be a sign to the seller that you are uncertain about the house itself.
Assuming you hold up your end of the bargain and you have the right contingencies in place, it won’t cost you any more in the long run since the deposit goes towards your down payment if financing is involved.
*As a VA buyer typically qualifies for zero down financing, they will get their deposit back at closing.
5. Be flexible and don’t ask the seller for credits to cover closing costs
It’s a good idea to ask the seller’s agent upfront what you can do to make the offer more enticing to the sellers.
For example, can you be flexible on the closing date for the seller? Also, a purchase offer asking for seller credits to pay for your closing costs will usually place behind an offer that does NOT ask for any seller credits. Some people assume just because a buyer does not have funds for closing costs, to just ask the seller to cover them.
SOLUTION: To make a buyers offer more competitive, we can give the buyer a lender credit to cover ALL the closing costs.
How does this work? It’s easy, instead of taking say a 3.5% 30 year fixed rate, take a slightly higher rate of 3.75% instead, and now there is a lender credit of roughly 2.5% available that can be used to pay ALL a buyers closing costs.
Not only is this a good negotiating tactic so the buyer and seller can strike a deal, but of course it saves a buyer money too. We present this option to all our buyers.
6. Close the Transaction Faster
Being able to close a transaction faster is another way to entice the seller to accept your offer in this competitive market. For example, if a seller is reviewing 3 offers, and there is a 21 day offer, a 30 day and 45 day offer, many times the seller will take the faster closing.
My company Citywide Financial Corp can close a Conventional, FHA or VA Purchase Transaction in 21-25 days. We have an outstanding team set up and dedicated to help close transactions fast.
Full transparency upfront is the key to getting an offer accepted these days, because usually the “Path of Least Resistance” is what we look for when reviewing offers. As many times the offer that is presented the clearest, is flexible and addresses any issues upfront, is the offer that will be picked.
Support Our Troops, help them buy a home!
Because of the large number of veterans that are living in California, helping VA buyers plays an important role in the local housing markets. My brother-in-law is currently in the Navy and my father-in-law is ex Navy, so I especially enjoy working with VA buyers.
VA buyers are always a pleasure to work with, and it feels good to know we are giving back a little to our military friends by helping them obtain home ownership, as they sacrifice so much for all of us on a daily basis.
My company is approved directly with the VA, so we are able to offer all the best programs that are available to our military friends. If you have any questions about getting approved for a VA loan, please feel free to contact me directly at 858-442-2686.
I look forward to chatting soon.