VA Loan Questions and Answers

Can I get a VA loan if I have had a bankruptcy in the last few years?

VA credit standards state that a veteran with a bankruptcy less than 3 years ago would generally not be considered a satisfactory credit risk unless: the veteran or spouse has obtained items on credit since the bankruptcy and has paid the obligations in a satisfactory manner for a continued period; and the bankruptcy was caused by circumstances beyond the control of the borrower, which would have to be verified. A bankruptcy discharged 3 to 5 years ago must be given some consideration in the underwriting of the loan. A bankruptcy discharged more than 5 years ago may be disregarded. These are the minimum standards that mortgage companies must follow when making a VA loan. In 95% of the cases, companies make the decision to approve a loan without VA's prior approval. Keep in mind that mortgage companies also have money at risk in giving you a VA loan, so they may have stricter credit standards than those mandated by VA.

How big of a loan can I get? If my guaranty entitlement is $36,000, does this mean I am limited to a $36,000 loan?

There is no limit on the size of a VA guaranteed home loan, provided that the veteran is qualified for the loan from a credit and income standpoint. However, as a practical matter, companies will generally limit the maximum loan amount to 4 times the amount of the veteran's available entitlement plus any downpayment. Currently, the maximum entitlement on loans above $144,000 is $50,750, which will support a no downpayment loan of up to $203,000.

Why do I have to pay a fee for a VA home loan? Since I paid a fee for my first loan, why is there a larger fee for my second loan?

The VA funding fee is required by law. The fee, currently 2 percent on no downpayment loans, is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a downpayment is 3 percent. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a downpayment. Second time users who make a downpayment of at least 5 percent pay a reduced funding fee of 1.5 percent, the same as first time users making the same downpayment. For a 10 percent downpayment, the fee drops to 1.25 percent. The effect of the funding fee on a veteran's financial situation is minimized since the fee may be financed in the loan.

May a veteran join with a non veteran who is not his or her spouse in obtaining a VA loan?

Yes, but the guaranty is based only on the veteran's portion of the loan. The guaranty cannot cover the non-veteran's part of the loan. Consult mortgage companies to determine whether they would be willing to accept applications for joint loans of this type. Mortgage companies that are willing to make these types of loans will likely require a downpayment to cover risk on the unguaranteed, non-veteran's portion of the loan. Unlike other loans, the mortgage company must submit joint loans to VA for approval before they are made. Both incomes can be used to qualify for the loan. However, the veteran's income must be sufficient to repay at least that portion of the loan related to the veteran's interest in (portion of) the property and the non-veteran's income adequate to cover the rest.

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