Veterans Administration (VA) - Loans
The Veterans Administration, VA, insures a portion of the mortgage loan. This product has even more relaxed lending policies compared to a conventional loan or their FHA counterpart.
Here are a few common misconceptions about VA loans:
1. The process it too tedious and time consuming.
- The VA back in the late 2000s revamped their process and took themselves out of the analog era and embraced the digital world. Certificate of Eligibilities are now ordered online and 95% of them are populated in a matter of minutes.
- The VA appraisal process is the same as with any Appraisal Management Company, AMC. The VA shotguns the work order out to VA approved appraisers and the first one that accepts it wins the work order. VA appraisals, similar to FHA appraisals, are good for 6 months.
- Termite inspections, if required, can be done at the same time as the appraisal, eliminating any down time. Termite inspections are good for 90 days.
2. VA loans are too expensive.
- By having VA disability income, the VA funding fee is waived.
- VA funding fees vary in cost depending on the down payment and number of times used.
3. I have already used my VA entitlement before for a home loan.
- VA loans are not a one-time use. If the loan was paid off through the selling or refinancing of the VA loan, the entitlement would most likely be replenished.
- If the VA loan was foreclosed or assumed, you may have enough remaining VA entitlement to go “second tier.” What this means is you have less than full entitlement and may require either a down payment or equity to be used to be eligible for another VA loan.
Why does it matter who the investor is on a VA product? Aren’t all VA loans the same?
When the VA loan product was first established in the 1940s, they set up a few certain things that they want to see in the file in order to insure the new loan. These guidelines are published on the VA’s website , but this is not an all-encompassing set up rules. The VA purposely left some things out to allow lenders the ability to decide the credit worthiness of a consumer, after all VA just insures the loan and lenders fund the loan. The #1 item that varies bank to bank is debt to income ratios as not all lenders play in the same sand box. Acceptable debt to income ratios for VA loans can vary between 40-70%. What that means for a consumer is if they applied with a bank that has a max debt to income ratio of 55% and your debt-to-income ratio is 60%, your file will most likely be declined. Aligning a file with the correct investor is the #1 key to a smooth and hassle-free closing.