The United States Department of Veterans Affairs (VA) offers zero down mortgage financing to qualifying veterans. The VA designed this mortgage, which is guaranteed by the Veterans Administration as a long-term financing option to eligible American veterans or their surviving spouses (provided they do not remarry). A veteran may request their certificate of eligibility from the Veterans Administration to determine if they are eligible for a VA mortgage. This mortgage type allows the qualifying veteran to purchase the residential property with no down payment. A funding fee charged by the Veterans Administration (ranging from 0 to 3.3% of the sales price) is typically added to the mortgaged amount. This loan type also allows the seller of the property to pay customary closing costs and pre-paids for the veteran. This allows most veterans to purchase the house with little to no money out-of-pocket.
The VA mortgage loan has a restrictive debt to income ratio, which is 41% of the borrower’s income. All debts, including: the mortgage payment, installment loans, revolving debt, child care expense, alimony & child support are included in the debt to income ratio. In addition, this loan type requires the veteran to meet the residual income requirements as set by the VA. Residual Income is a calculation showing the remaining income after debts and expenses, which includes: taxes and utilities.
Currently, the VA offers zero down financing for qualified veterans up to $424,100 in most areas, although this amount may be higher in designated high cost counties. Appraisals are ordered through the Veterans Administration and completed by licensed appraisers. The funding fee charged for this loan type is typically waived for disabled veterans. There is no mortgage insurance charged on a VA loan. Even though the Veterans Administration insures the mortgage for veterans, applicants must be qualified for the mortgage through a licensed mortgage lender. Credit history and acceptable credit scores will impact the ability to be approved for any mortgage type.
Documentation needed for a VA loan includes the following:
• Copy of DD214
• Certificate of Eligibility
• Last 2 Pay Stubs or Proof of Income Source
• Last 2 Months’ Bank Statements
• Last 2 Years’ Federal Tax Returns
• Last 2 Years W2s/1099s
• Divorce or Separation Agreement (If Applicable)
• Bankruptcy Schedules and Discharge Paper (If Applicable)
Preparing yourself to obtain a mortgage will eliminate potential headache and frustration. Having your house in order and using a reputable and knowledgeable lender experienced in handling VA mortgages will make your home buying experience a more pleasant event. Investigate the reputation and history of your lender. Talk to your family and friends about who they used for their mortgage financing. A personal referral from a friend or family member will create a higher comfort level.