VA Home Loans

The Patterson Company Real Estate Lending  specializes in educating our veterans and active military personnel on the VA loan program. We provide comprehensive guides, calculators and insight pertaining to VA Loans, VA Loan refinance and VA ARM loans.

The VA Home Loan helps Active Duty, Veterans and eligible surviving spouses become homeowners.  These are great benefits and we are dedicated to make this as smooth as possible in either a Home Purchase or Refinance.  These benefits can be used to purchase or refinance a home for your own personal occupancy all with no money down and no mortgage insurance.

The VA does not provide the funds or make lending decisions.  However, the VA provides our wholesale lending partners a guaranty, sort of like an insurance policy, of 25% of the max loan amount, enabling our lenders to provide you with more favorable terms compared to Conventional  or FHA mortgages.  You can purchase a home with ZERO money down, 100% financing, no mortgage insurance, and most likely….. little to no out of pocket costs (each situation is different as there are variable factors that will influence this).

VA HOME PURCHASE LOANS

  • No Down payment as long as the sales price doesn’t exceed the appraised value
  • No private mortgage insurance
  • Closing costs may be paid by the seller
  • VA has provided limits on the amount service members can be charged for closing costs
  • No early pay off penalty fees
  • Assistance provided if you get into financial difficulty
  • Do not need to be a first time home buyer
  • Can be used again
  • Is assumable—subject to lender or VA approval of assumer’s credit.
  • Flexibility of negotiating interest rates with the lender
VA CASH OUT REFINANCE
  • Can be used to refinance a non-VA loan into a VA loan.
  • Take Cash out for paying off debts, funding school, making home improvements, cash for whatever reason.  Usually limited to 95% Loan to Value(LTV), but can be 100% if used to pay off a lien on the home. Has to be reviewed
  • VA will guaranty up to 100% of the value of your home
INTEREST RATE REDUCTION REFINANCE LOAN (IRRRL)
  • Used to lower your existing VA home loans current interest rate, shorten your term (30 to 15 years) or convert an adjustable rate mortgage (ARM) into a fixed rate mortgage
  • No appraisal or credit underwriting required by the VA when applying for a IRRRL. *Note* some investors will have different requirements
  • IRRRL may be done with no out of pocket costs by including all costs in the new loan or by providing an interest rate with credits that enable our lender to pay for all costs.
  • No Cash back allowed on these transactions
  • You will reuse the entitlement you originally used on the same property.  Must be a VA to VA Refinance
  • A Certificate of Eligibility (COE) is not required.  We can go onto the VA system and verify your previous use or you can simply provide us your copy if you have one.
  • No loan other than the existing VA loan may be paid from the proceeds of an IRRRL.  If you have a 2nd mortgage, the holder must agree to subordinate their loan, so that the new VA loan holds first lien position
  • You do not have to occupy the home for an IRRRL Home Loan.  You only have to certify that you occupied the home previously
LOAN LIMITS
VA does not set a cap on how much you can borrow to finance your home. However, there are limits on the amount of liability VA can assume, which usually affects the amount of money an institution will lend you. The loan limits are the amount a qualified Veteran with full entitlement may be able to borrow without making a down payment. These loan limits vary by county, since the value of a house depends in part on its location.

The basic entitlement available to each eligible Veteran is $36,000; however your full entitlement is quite simply calculated by a factor of 25% times the max VA loan limit by county.  The typical full entitlement is $106,025, which reflects 25% of the standard national conforming loan limit of $424,100.   Lenders will generally loan up to four times a Veteran’s available entitlement without a down payment, provided the Veteran is income and credit qualified and the property appraises for the asking price. You will see that most counties have the conforming loan limit of $424,100.  As you refer to this chart, you will see that the max loan limit for Pierce, King and Snohomish Counties is $592,250 so the maximum entitlement available is $592,250 x 25% = $148,062 See Loan Limits for more information about the limits in your county.
 
We have from time to time have assisted VA qualified buyers in using their entitlement a 2nd time, even though they are currently holding another VA mortgage. This occurs typically when you decide to rent out your home in your previous duty station that is under a VA home loan and decide to purchase another home using your remaining VA entitlement benefits in the Fort Lewis
WA area.

ELIGIBILITY

To qualify for a VA home loan, you must have reasonably good credit and sufficient income for your desired home price range, and a Certificate of Eligibility(COE)   We have wholesale lenders who will provide service members/veterans a VA home loan with a minimum mid credit score of 600, however unless there is an unusual scenario, we prefer to assist you in improving your credit to at least to 640 or above where pricing is more favorable We are not here to just see that we can get you into a home, but we want to put you into a situation where you are leveraging your purchase wisely.

 GETTING YOUR CERTIFICATE OF ELIGIBILIY

As mentioned above, you will need a valid Certificate of Eligibility (COE) to be eligible for a VA-guaranteed home loan. I can get this quite conveniently for you electronically through the VA Web LGY system and it only takes seconds, so I can take care of this for you.  The eligibility requirements to obtain a COE are listed on this link for Servicemembers and Veterans, spouses, and other eligible beneficiaries.  Your length of service or service commitment and/or duty status may determine your eligibility for specific home loan benefits.

If you would prefer to establish your eligibility on your own, you can certainly do so. You can do this by registering on the VA eBenefits site at www.ebenefits.va.gov.  You than can request your COE electronically.  You can also request your COE by mail by downloading and completing a VA Form 26-1880 from the internet at the following web site: www.va.gov/vaforms and include this with your DD-214 and send this to the VA Eligibility Center:
Atlanta Regional Loan Center, Attn: COE (262), PO BOX 100034, Decatur, GA 30031.  Tel# 1-888-768-2131

FUNDING FEE

The VA upfront funding fee is what enables the VA Home Loan Guaranty benefit to work.  All veterans must pay the funding fee as part of the loan process (except for disabled rated active duty/ veterans or a qualified surviving spouse).
This funding fee reduces the loans costs to taxpayers as this program requires no down payment and no mortgage insurance.  This funding fee is a percentage of the loan amount which varies based on the type of loan and your military category.  If you are using your VA benefits for the first time and are required to pay the funding fee (you have no disability rating), you will see that the fee is  2.15% for active duty/veterans for 100% financing as reflected on the funding fee chart.   The funding fee chart provides you percentage of fee based upon your service category and differences if you make a down payment. You can finance the funding fee into your home loan or pay for it in cash.  The funding fee must be paid for at closing.

INCOME AND DEBT TO INCOME..IMPORTANT DISCUSSION

As mentioned before, sufficient income is part of the qualifying parameters and this is one area that requires preparation in order to avoid frustrations at the time you would like to purchase.  If you are anticipating your next PCS move and plan on purchasing a home at your next duty station, keep in mind, before purchasing that brand new vehicle(that’s just too good of a deal), the impact it might have on a debt to income calculations and your overall credit score.

My best advice is if you are planning on purchasing a home, avoid big ticket purchase items like a car and work out a plan to eliminate as much existing debt as you can. If you do not have credit, please work on establishing credit, but pay off your balances or keep the balances at least 30% or less of the max credit limit allowable on your credit cards.

Lenders look at 2 debt to income parameters, the housing debt ratio (housing costs/gross income) and the total debt ratio (housing+all other monthly minimum payments, to include child spt/gross income).  Our lenders primarily look at the total debt to income ratio, which if “manually” underwritten must be at 41% or below if there are no other compensating factors.
We submit all of our files through Fannie Mae/Freddie Mac automated underwriting, and if we receive a “refer/eligible” finding, it will be “manually” underwritten as mentioned before by a VA designated underwriter.

This means that there might be something in the file that elevates the risk to investors and so total debt to income usually must be at 41% or below.  However, we have had scenarios where we have had manual approval with debt ratios in the mid 40’s and each situation has to be evaluated on its own merit and circumstances.

The total allowable debt to income ratios on automated “approve/eligible” findings can be even as high as 58% with strong compensating factors(lots of reserves, strong income/credit, etc). However, for planning purposes, it’s a much better strategy to focus on keeping your total debt as low as possible, making on time payments and to certainly know what your current credit looks like so there are no surprises when you decide to purchase your home. Check your credit early and periodically, so you stay in control and have time to make corrections so that you are ready to purchase a home
.
Remember, above everything else, is what you feel most comfortable with in home price ranges based upon your budget goals.  Even if you are approved at higher priced homes, does not necessarily mean that’s what you should be looking for.