VA Purchase Home Loan
Buying a Home with an VA Mortgage Loan
VA loans are available for eligible veterans and spouses of deceased veteran who died from a service connected disability. The govt. insured loans come with no down payment up to a certain limit and credit scores as low as 620. These loans are backed by the U.S. Department of Veterans Affairs. What makes VA loans popular are the low interest rates, no mortgage insurance, and zero down feature.
Qualifying For a VA Purchase Loan
- You must be currently active duty military or a veteran who was honorably discharged. li>You must have served a minimum of 90 consecutive days of active duty during wartime or at least 181 consecutive days of active duty service during peacetime.
- Over six years of service in the National Guard or Selective Reserve.
- You need at least a middle FICO® Credit Score of 620 (unwritten rule for most) but 600 is still doable.
- You need a debt-to-income ratio (DTI) that is under 50-percent
- Stable employment during the last two years to support the new payment obligations .
- You need to pay for the upfront VA Funding Fee (2.3% to 3.6%).
- The property must be your primary residence and you need to move in within 60 days of closing on a purchase loan
- You have not had a foreclosure in the last three years
VA eligible property types include single family homes, condos, townhomes, and two- to- four unit properties such as a duplex, triplex, or fourplex. Manufactured and tiny homes are not eligible. There are not many loan products that provide you with the opportunity to get a loan on a duplex with zero down payment.
What are the VA loan requirements for the property?
Loan Limits: There really isn't a loan limit. The VA loan is structured along with the county conforming loan limits. Whatever amount the loan is over the county loan limit, the service member must then put down 25% of that amount.
For example, if you're buying a home in San Diego County, the VA will guarantee up to $701,500 (the county's conforming limit) for a detached home, condo or townhome in 2020. If you need an VA loan to buy a duplex, they will insure up to a limit of $898,050. This means on a sales price of $1,000,000 for that duplex, you will only need a 2.5 percent down payment while the lender funds you approximately $75,000 more.
Property Conditions:The home or multi-unit property needs to satisfy VA's property requirements:
The roofing, heating, electrical all must be in satisfactory condition. The property must be free of termites, dry rot and fungus and lead-based paint be changed to the new minimum housing health standards.
Disadvantages; VA loans are not offered on property used solely as a rental property or vacation homes. In addition, sellers are not fans becuse of the zero down feature, property condition, and requests for sellers to help pay for closing costs.
VA-approved lenders vary from your local banks and credit unions to mortgage brokers/lenders that will offer you a VA loan. As of May , 2020 the banks, credit unions and some lenders have increased their VA credit score requirements to 640 or 660 or stopped doing them altogether like Navy Federal credit union.
Fortunately, some mortgage brokers will still fund VA loans for borrowers with middle credit scores from 600 to 640.