Updated June 2023
Do I need a Down Payment And Assets to qualify for a VA Home Loan?
In short, NO. The VA home loan is one of the most unique VA benefits because it allows qualifying service members and Veterans to buy a home, build a home, and renovate a home without a down payment. Generally speaking, there are no specific assets required for a VA loan. However, lenders will want to see that you have enough cash on hand to cover the closing costs.
In addition to cash, lenders may also want to see that you have other assets, such as savings accounts, retirement accounts, or investment accounts. These assets can help to demonstrate your financial stability and ability to repay the loan.
Here is a list of some of the assets that may be considered by lenders when underwriting a VA loan:
- Savings accounts
- Retirement accounts
- Investment accounts
- Real estate
- Life insurance
It is important to note that lenders will not require you to have all of these assets in order to qualify for a VA loan. However, having a good amount of assets can help to improve your chances of getting approved for a loan and getting a better interest rate.
If you are considering a VA loan, it is a good idea to talk to a lender about your specific situation. They can help you to determine how much cash you will need to have on hand for closing costs and whether or not your other assets will be considered.
VA loan closing costs
Closing costs can vary depending on the lender and the property, but they typically range from 2-6% of the loan amount, but the exact amount will vary depending on the lender, the property, and the state in which you are buying.
Some of the common closing costs associated with VA loans include:
- VA funding fee: This is a one-time fee that is charged to borrowers who use a VA loan. The fee is based on the loan amount and your military service status. For example, the VA funding fee for a first-time VA homebuyer with no down payment is 2.15% of the loan amount.
- Loan origination fee: This is a fee charged by the lender to cover the costs of processing the loan. The fee is typically 1% of the loan amount, but it can be higher or lower depending on the lender.
- VA Appraisal fee: This is a fee charged by an appraiser to determine the value of the property. The fee is typically $400-$600.
- Title insurance: This is a policy that protects you from title defects. The cost of title insurance varies depending on the state, but it is typically around $1,000.
- Recording fees: These are fees charged by the county to record the deed and mortgage. The fees are typically around $100-$200.
- Other closing costs on VA loans: There may be other closing costs associated with VA loans, such as taxes, insurance, and attorney fees.
The good news is that you may be able to negotiate with the seller to pay some of the closing costs. The VA allows sellers to pay up to 4% of the purchase price in closing costs. However, to get that it’s important you have a Military friendly Real estate agent helping you by asking the seller for this contribution. Don’t forget that if the seller is essentially reducing their sales price by making less. If the seller has a contribution built into their sales price then there is a chance the home doesn’t appraise for the sales price. In this case, the seller would be asked to lower the price to the appraised value.
What closing costs can’t be paid by the Veteran?
- Commission for real estate professionals
- Brokerage fee
- Buyer broker fee
- Termite report (unless you’re using a refinancing loan)
What closing costs are negotiable between a Vet buyer and a home seller?
- VA funding fee
- Loan origination fee
- Loan discount points or funds for temporary “buydowns”
- Credit report and payment of any credit balances or judgments
- VA appraisal fee
- Hazard insurance and real estate taxes
- State and local taxes
- Title insurance
- Recording fee
What is the max seller contribution on a VA loan?
- The seller can pay up to 4% of the loan amount in the seller’s concessions, but this only applies to certain closing costs, such as the VA funding fee. Loan discount points are not included.
- The seller can contribute up to 4% of the loan amount towards closing costs, but this does not include loan discount points.
- The seller can pay up to 4% of the loan amount towards closing costs, but this only applies to customary closing costs. Loan discount points are not considered customary closing costs.
Here are some tips for reducing your VA loan closing costs:
- Shop around for lenders. Get quotes from several lenders so that you can compare closing costs or feel confident that Security America Mortgage will put your needs first while giving you the best deal and best service.
- Ask about seller contributions. The VA allows sellers to pay up to 4% of the purchase price in closing costs.
- Consider a down payment. Making a down payment will reduce your loan amount, which will lower your closing costs.
- Ask about closing cost assistance programs. There are several government programs that can help you pay for closing costs.
What are VA loan requirements?
- Must be a Veteran: You must have served on active duty in the U.S. military for at least 90 days, or for any length of time during a war or campaign.
- Must have a Certificate of Eligibility (COE): The COE is a document that proves you are eligible for a VA loan. You can get your COE from the VA website or by contacting your local VA office.
- Must meet credit and income requirements: The VA does not have a minimum credit score requirement, but lenders typically do. Most lenders require a credit score of at least 620 for a VA loan. The Department of Veterans Affairs doesn’t have a minimum credit score criteria, but VA lenders do. You will also need to show that you have enough income to afford the monthly payments.
- Must be able to make a down payment: You do not have to make a down payment on a VA loan, but you can if you want to. If you do make a down payment, it can help you get a lower interest rate.
- Must have a satisfactory appraisal: The property you want to buy must appraise for at least the amount of the loan.
- DD-214 is proof of your military service.
What are the VA home loan benefits?
- VA loans have no maximum loan amount: You can borrow up to the full appraised value of the property, as long as you meet the other requirements.
- VA loans have no private mortgage insurance: You do not have to pay mortgage insurance on a VA loan, which can save you money.
- VA loans have flexible underwriting: The VA has flexible underwriting standards, which means that you may be able to get a VA loan even if you have a less-than-perfect credit history.
What debt-to-income ratio do you need for a VA Loan?
There is no maximum debt-to-income (DTI) ratio for a VA loan that is automatically approved. However, the VA does have guidelines that lenders must follow when underwriting VA loans. The Department of Veterans Affairs would like to see that you have a 41% max DTI. These guidelines state that the borrower’s DTI ratio should not exceed 41% unless the borrower has compensating factors. Compensating factors can include things like a high credit score, a large down payment, or a history of on-time payments. Lenders will take your file and run it through the AUS Automated Underwriting system. If your VA loan doesn’t get an AUS then 43% is the max DTI for a manually underwritten VA loan. An AUS approval can actually happen for higher than 43% DTI because the system takes into consideration compensating factors. Some lenders may have stricter DTI guidelines than others when it comes to manually underwriting your file.
Here are some additional things to keep in mind about DTI and VA loans:
- DTI is calculated by dividing your monthly debt payments by your gross monthly income.
- The lower your DTI ratio, the better your chances of getting approved for a VA loan.
- There are a number of factors that can affect your DTI ratio, including your housing costs, your car payments, and your credit card debt.
- If your DTI ratio is high, you may be able to lower it by making a larger down payment or by paying off some of your debt.
Do VA loans require reserves or cash in the bank?
The number of months of reserves needed to qualify for a VA loan depends on the lender. Some lenders may require two months of reserves, while others may require three or even six months. The amount of reserves required will also depend on the borrower’s debt-to-income ratio (DTI).
Reserves are liquid assets that can be used to cover unexpected expenses, such as a job loss or a medical emergency. They can include things like cash, savings accounts, and money market accounts.
Lenders require reserves to ensure that borrowers have enough money to cover their monthly mortgage payments if they lose their job or experience another financial hardship.
If you are applying for a VA loan, it is a good idea to talk to your lender about their reserve requirements. They will be able to tell you how many months of reserves they require and what types of assets they will accept.
Here are some additional things to keep in mind about reserves and VA loans:
- Reserves are not required for all VA loans.
- The amount of reserves required will vary from lender to lender.
- Reserves can be in the form of cash, savings accounts, or money market accounts.
- Lenders may require borrowers to have two, three, or even six months of reserves.
- Borrowers with a lower DTI ratio may be able to get away with having fewer months of reserves.
What Types of VA Loans are Available in 2023?
- VA home loan to purchase
- VA renovation loan
- VA construction loan
- VA one-time close construction loan
- VA 2 time close construction loan
- VA IRRL
- VA conversion loan
- VA Land loan through state sponsors like Texas Veterans LandBoard
- Jumbo VA loan
- Native American direct loan
- Texas Veterans Land Board VA land loan
- VA cash-out refinance that’s not available in Texas but in participating states.
What are the Property Requirements for VA loans?
The VA has a set of minimum property requirements (MPRs) that must be met for a property to be eligible for a VA loan. These requirements are designed to ensure that the property is safe, sanitary, and structurally sound. The MPRs cover a wide range of factors, including:
- The condition of the roof, heating, and cooling systems, and electrical wiring
- The presence of lead-based paint
- The condition of the foundation and structure
- The availability of clean water and sanitary facilities
- The property’s location in a floodplain or other hazardous area
If a property does not meet the MPRs, it may not be eligible for a VA loan. However, there are some exceptions to the MPRs. For example, if a property is in need of repairs, the seller could make the repairs or you could apply for a va renovation loan.
How much is the VA funding fee in 2023 for a VA construction loan and a VA home loan?
Who is exempt from the VA funding fee?
- When you are eligible for VA compensation for a service-related disability, but you are currently receiving retirement or active-duty pay.
- If you are receiving Dependency and Indemnity Compensation (DIC) from the VA as the surviving spouse of a Veteran.
- Active duty service members who have received a proposed memorandum rating before the loan closing date that indicates they are eligible to receive compensation from the VA because of a pre-discharge claim.
- Active duty service members who, before or on the loan closing date, provide evidence of having received the Purple Heart.
- Veterans with a 10% or higher disability rating are exempt from the VA funding fee.
- You are receiving compensation from the Department of Veterans Affairs (VA) for a service-related disability.
How many times can you use a VA loan?
There is no limit on how many times a Veteran can use a VA home loan. However, the amount of entitlement that a Veteran has will decrease each time they use a VA loan. Entitlement is the amount of money that the VA will guarantee on VA home loans. If a Veteran uses all of their entitlement, they will not be able to get another VA loan unless they restore their entitlement. There are a few ways to restore full va loan entitlement, including:
- Paying off a VA loan in full.
- Refinancing a VA loan with a conventional loan.
- Get a one-time restoration of your full VA loan entitlement from the VA.
Here are some additional things to keep in mind about VA loan entitlement:
- Entitlement is not the same as a down payment.
- Entitlement is not transferable to another person.
- Entitlement can be used for any type of property, including a single-family home, a condominium, or a townhouse.
- The amount of entitlement that a Veteran has will depend on their military service.
How do you apply for a VA home loan?
Simply go to the website of Security America Mortgage and apply for the VA loan program best for you. When you are applying it’s important that you have studied this information, know where you want to live, and are considering working with a Realtor. Getting pre-approved first before starting the home search makes the most sense for you and your real estate agent.
How do I get my COE?
Security America Mortgage has direct access to va.gov and can get your automated Certificate of Eligibility COE. If you want to do it on your own go here COE at the Veteran Affairs
How to prepare for the VA COE application?
- Veterans need to have a copy of their discharge or separation papers (DD214).
- If you’re an active-duty service member, you’ll need a statement of service—signed by your commander, adjutant, or personnel officer with the following information:
- Your full name
- Your Social Security number
- Your date of birth
- The date you entered duty
- The duration of any lost time
- The name of the command providing the information
Can you qualify for a VA loan with a low credit score?
The Department of veterans affairs doesn’t actually set credit score requirements. Lenders do and while most lenders need a 620; there are rare cases where a lower score gets approved.
What are the Current VA mortgage rates on va home loans?
VA mortgage rates are always changing and it’s best to get a quote each day.
What are the VA loan limits in 2023 in areas that aren’t considered High Cost?
What are the VA loan limits for high-cost areas?
$1,089,300 in 2023.
What makes an area of the USA considered a high cost for VA loans and other conforming loans?
If the median home price exceeds 115% of the national conforming loan limit then it’s a high-cost area.
What does conforming loan limit mean?
The conforming loan limit is the maximum amount that a lender can lend on a conventional mortgage without having to purchase mortgage insurance.
What areas in the United States are considered high-cost areas?
There are a number of areas in metropolitan cities that are high-cost areas. The map below gives you a visual example.
Does the Department of veterans affairs have a cap on va loan amounts for first-time home buyers?
No, there is no cap on the va loan amount for Veteran first-time home buyers set by the Veterans Affairs but a lender could impose one.
Can I get a Jumbo VA loan in a high-cost area without putting money down?
The VA loan amount maximum is based on the conforming loan limit set by the Federal Housing Finance Agency (FHFA). The conforming loan limit is the maximum amount that a lender can lend on a conventional home loan without having to purchase private mortgage insurance.
The VA home loan amount maximum is higher than the conforming loan limit in some areas because the VA guarantees some of the VA home loan program, which reduces the lender’s risk. This allows Private lenders to lend more money to Veterans in high-cost areas.
What is the VA loan process for buying a home?
- Get your COE and confirm your VA loan eligibility
- Apply for a VA
- home loan
- Get pre-approved for your VA home loan benefit
- Find a real estate agent
- Shop for homes and Mortgage lenders/offer VA loans.
- Call 855GOVANOW to talk to VA loans specialist.
- Make an offer on as many properties as you want
- Make a deal
- Do your due diligence during the option period.
- Get an inspection
- Make sure it’s the best home for you.
- Make your VA loan application is progressing
- Know your closing costs
- Know your interest rate and shop va loan rates
- Lock in your interest rate at the best time
- Go through VA loan underwriting
- Get a UW VA loan approval
- Close with your VA-approved lender on your VA loan
- Get your keys the day of funding of your VA loan
What are the steps to the va construction loan One Time Close?
- First, you want to get pre-approved by a va one-time close construction lender like Security America Mortgage. They will confirm your VA loan eligibility and pre-approve you to buy and build at the same time so that you have 2 great options. Having 2 options in today’s market is a good idea.
- You need to start looking for land and a builder.
- Once you have a builder you need to consider plans
- Try to acquire land before starting the va construction loan process because your loan is easier if you already own land.
- The Texas Veterans Land Board does VA land loans in Texas and they are one of a kind. Otherwise, if they don’t work because you’re in a different state land loans are typically done by local banks.
- land loans typically have a 20% down payment and your VA loan eligibility doesn’t come into play.
- Banks that do land loans don’t usually offer the VA one-time close construction loan
- If you want to buy land and close on your VA construction loan at the same time it’s important that your contract to buy land gives you time to close on the land and VA construction loan at the same time.
- Having approved plans is essential to close on the land and construction loan at the same time.
- Having a VA-registered builder is necessary and your lender must also approve the builder.
- When you have an approved va builder with the final plans approved, land owned or in contract, and an approved appraisal then you are set to close on your VA construction loan.
What are the advantages of a VA one-time close construction loan over a 2-closing VA construction loan?
- One closing saves time.
- One closing saves closing costs.
- One closing is easier.
- One closing means no requalification.
- One closing means no payments upfront when working with Security America Mortgage.
- One closing means no need for a 2nd appraisal.
- One closing means you have a guaranteed rate and don’t have to worry about what rates will be like down the road.
Should I ever consider a conventional mortgage over a VA loan?
According to even the VA, VA loans have “competitively “low-interest rates” According to Garrett Puckett, an expert on VA loans, “you might consider conventional loans when you have 20% to put down with an automated approval/AUS because you won’t have private mortgage insurance, and there is a chance your interest rate could be less than a VA loan. Let your VA mortgage lender confirm.”
What is new with VA loans in 2023?
According to Garrett Puckett, there are different VA loans that are coming into play more in 2023. He goes on to say that Security America Mortgage is helping Vets build the home of their dreams with a VA one-time close construction loan and some Vets find a fixer-upper that’s a good deal for a VA renovation loan.
What has changed with the BAH Basic Allowance for Housing in 2023?
The Basic Allowance for Housing (BAH) rates for 2023 updates were released on December 14, 2022. The rates increased an average of 12.1 percent representing the largest increase in over a decade. The increase was due to inflation, higher interest rates, and overall rising housing costs across the country.
Here are some of the most significant changes to the BAH rates in 2023:
- The average BAH rate has increased by 12.1%.
- The highest BAH rate increase was for the O-10 pay grade, and they saw an increase of 14.3%.
- The lowest BAH rate increase was for the E-1 pay grade, and they received an increase of 10.5%.
- BAH for all pay grades and dependency statuses increased.
- BAH rates for certain areas, such as Hawaii and Alaska, increased more than the national average.
The BAH rates are created by the Department of Defense (DoD) based on multiple factors, including the cost of housing in a particular area, the number of service members in that area, and the pay grade of the service member. The DoD reviews the BAH rates every year and makes adjustments as needed.
The BAH rates are important for service members because they help to offset the cost of inflation and housing. The BAH rates are not taxable, so they can provide a meaningful financial benefit to service members.
US Armed Forces servicemembers can find the BAH rates for their pay grade and dependency status on the DoD website. You can also use the website to find the BAH rates for specific areas.
Can I use BAH to qualify for the VA loan Benefit?
Yes, Basic Allowance for Housing can be used and helpful when qualifying for VA loans.
Does disability income help Veterans qualify for VA loans?
Yes, disabled Veterans can use their gross disability income when utilizing their VA loan benefits.
Can a Military Spouse get a VA loan if their serving spouse makes the ultimate sacrifice to his or her country?
The surviving spouse of a military service member who died while on active duty or as a result of a service-connected disability is eligible for the VA home loan benefit.
Can the VA loan funding fee be refunded after closing?
Yes, the VA loan funding fee can be refunded after closing under certain circumstances.
- The most common reason for a refund is if the borrower is later awarded VA compensation for a service-connected disability. The effective date of the VA compensation must be retroactive to before the date of the loan closing. If you get a proposed or memorandum rating after your loan closing date, you’ll still need to pay the funding fee. You won’t be eligible for a refund based on this rating.
- Another reason for a refund is if the borrower refinances their VA home loan with another type of loan, such as a conventional mortgage. If the VA borrower is able to get a lower interest rate on the new VA loan, they may be able to get a refund of the VA funding fee.
- The VA will also consider refunds on a case-by-case basis for VA loans where the VA borrower can demonstrate that they have experienced financial hardship as a result of the VA loan.
To request a refund of the VA funding fee in 2023, the VA borrowers must contact the VA Regional Loan Center or call them at 800-698-2411.
Information provided by Garret Puckett