Kentucky Housing MCC | KHC Mortgage Credit Certificate
The U.S. Department of Veterans Affairs (VA) designed a mortgage loan specifically for veterans, active-duty service members and reservists to make it easier for them to buy a home. While some borrowers may be familiar with this loan, they may not know certain details.
VA home loans don’t have a limit, are only available through lenders, must be used for primary residences and eligible to surviving spouses, and require a Certificate of Eligibility.
Let’s take a closer look:
1. There isn’t a cap on the amount someone could borrow.
Unlike many other mortgage loans, VA loans don’t have a set cap on how much money a borrower could receive, according to the VA. This essentially means there isn’t a limit. However, the VA itself does, with it only assuming liability on a certain amount.
“The loan limits are the amount a qualified Veteran with full entitlement may be able to borrow without making a down payment.”
Specifically, “there are limits on the amount of liability VA can assume, which usually affects the amount of money an institution will lend you,” states the department. “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.”
These limits also tend to change from year to year, and can be viewed on the VA’s official website.
2. VA loans cannot be used to purchase vacation homes.
One of the stipulations of a VA home loan is that the property being purchased must be used as the borrower’s primary residence. This means any vacation homes, as well as properties buyers are interested in purchasing for investment purposes, do not qualify. However, buyers aren’t limited to only single-family homes. Multi-family homes, some condominiums, and manufactured homes, are also eligible—they just need to be approved by the VA beforehand.
3. Some surviving spouses are eligible.
As aforementioned, VA home loans were developed to help veterans, active-duty service members and reservists afford a home. Still, there are some exceptions in which surviving spouses may be eligible, as well. Several conditions in which this could take place, as described by the VA, include:
A surviving spouse of a veteran who was killed in action or by a combat-related disability may qualify, for example, as long as he or she is not remarried. A spouse of an active-duty service member “missing in action or a prisoner of war” could obtain this type of loan, too.
Additionally, any surviving spouses who remarry on or after age 57, and on or after December 16, 2003, or who are married to a “certain totally disabled” veteran “whose disability may not have been the cause of death,” are also considered an eligible candidate.
4. The VA doesn’t provide borrowers with the loan.
The VA created the loan and guarantees it, but the agency doesn’t actually provide qualified borrowers with a VA loan. Applicants would need to be approved by a trusted mortgage lender and obtain the funds that way, instead.
5. Borrowers must receive a Certificate of Eligibility.
Although borrowers have to apply for a VA home loan via a lender, they must receive a Certificate of Eligibility (COE) by the VA to be approved, which they can do online, via mail, or through their lender. A COE simply proves that they are suitable candidates and meet the loan’s qualifications. Since different types of buyers could be eligible, the VA breaks down what each one would need to obtain a COE:
For instance, any veterans applying need a DD Form 214, and are “required to have a copy showing the character of service (item 24) and the narrative reason for separation (item 28).”
- Borrowers using rental income from a non-subject property to qualify need to document a minimum 2 year rental history and 3 months reserves PITI for each rental property (excluding property being vacated and turned into a rental). When no mortgage exists on a rental property, 3 months reserves must still be provided that cover taxes, insurance, HOA dues, and any other fees documented for the property. These reserves cannot come from equity, gift funds, or any loan proceeds.
- Rental income from boarders can now be used as qualifying income provided
- A 2 year history of tax returns can be provided showing boarder income generated by the property; AND
- The use of the property for boarder rental cannot impair the residential nature of the property and cannot exceed 25% of the property’s total floor area
- Alimony, child support, and maintenance require at least 3 years continuance to be considered effective income.
- For payment plans after a judgment, VA will generally require 12 months of timely payments before credit is considered reestablished. A shorter repayment history may be considered if it can be determined that the borrower addressed the judgment responsibly and began a repayment plan immediately after it was filed. If borrower has missed payments within the last 12 months, they will be ineligible for financing even if the debt is paid in full.
- For voluntary short sales or deeds-in-lieu where the borrower was current on their payments at the time the property was surrendered, no minimum derogatory credit waiting period will be required.
- VA’s list of required Appraisal Report Contents has been updated and now includes specific photographs required on the appraisal (refer to VA Chapter 11: Topic 3: Appraisal Report Contents for full list).
- VA Chapter 11: Topic 4: Gross Living Area has been added to provide direction in determining the Gross Living Area of the property.
- Other sections have been updated to include guideline changes from previous VA Circulars.
Louisville Kentucky VA Home Loans Frequently Asked Questions
Frequently Asked Questions
- What is a COE? Where can I get one?
- COE stands for Certificate of Eligibility. This certificate proves that you are a veteran and, therefore, eligible for a VA-guaranteed home loan. Mortgage companies that work with AllMilitary can get a COE for you during the loan process.
How do interest rates fluctuate?
Interest rates can change daily, sometimes even a couple times a day. They are based on the 30-year mortgage bond and many other market factors. Credit, employment status, loan program and many other factors can also affect interest rates.
Why should I use my VA home loan benefit?
The VA loan program helps active duty and retired military personnel purchase homes. The VA will guarantee 100% financing on a home at a competitive rate, without you having to pay mortgage insurance. The VA also limits the types of fees that can be charged, protecting you against predatory lending.
What is a funding fee? Do I have to pay for this?
The VA funding fee is a fee added to loans. The Department of Veterans Affairs uses these fees to help fund its VA loan program. The first time you use a VA loan, the funding fee will be 2.15% of the loan amount. For each subsequent use, the funding fee will be 3.3%. You will be required to pay it, unless you have a service-related disability of 10% or greater, in which case the funding fee is waived.
What does a VA lender need from me to see if I qualify for a loan?
A VA lender will want to know your income and debts, and your social security number so that your credit history can be checked. After you supply this information to a lender, it will contact you in a few hours to let you know if you are eligible for a VA loan.
What are the benefits of a VA loan?
A VA loan offers 100% financing with no mortgage insurance fees. The loan is assumable, and you are eligible for streamlined refinancing if rates go down. A VA loan also offers great rates and is less strict on credit than most conventional loans.
Can I get an interest-only loan?
Interest-only options are unvailable with VA loans. However, many VA-approved lenders offer interest-only conventional loans.
Can I purchase only land with a VA loan?
No, VA loans are for home purchases and new home construction. The VA will not approve a loan that is only for land. However, you may use a VA loan to purchase a lot for a manufactured home.
May I use my VA eligibility more than once?
Yes, but in most cases you can only hold one VA loan at a time. After the first home loan is paid in full, your eligibility will be restored for another loan.
What is the funding fee for a second VA loan?
The funding fee is 3.3 %. But with a 5% down payment, the funding fee drops to 1.5%.
How important is my credit score to the VA?
The VA does not emphasize credit scores as much as conventional lenders. However, it does looks for a clear credit history in the borrower’s previous 12 months.
Can a family member use their grandparent’s or parent’s eligibility to qualify for a VA loan?
No, only a veteran or the surviving spouse of a veteran killed during active duty is eligible for VA loan benefits. Active duty servicemembers also are eligible if the home they are purchasing will be a permanent residence and they are within 60 days of moving in.
Can I use a co-borrower to help get approval?
VA guidelines only allow a spouse as a co-borrower. However, many VA-approved lenders offer conventional financing, which may be more suitable if a co-borrower other than a spouse is needed to secure a loan.
May my spouse co-sign so that I can get a larger VA loan?
Your spouse may co-sign in order to help you qualify for a VA loan. However, your spouse’s liabilities, in addition to your spouse’s income, will be considered when determining eligibility and loan amount.
Can I have two VA loans at once?
No. You can have only one VA loan at a time, and it must be used for a home that is your primary residence. After you pay off that loan, you are eligible for another VA loan.
Does it cost anything to prequalify for a VA loan?
No, it does not. The VA loan specialists that work with VAJoe do not charge prequalification fees.
What are the differences between VA loans and a conventional loans?
The main differences are that VA loans are guaranteed by the Veterans Administration, they require no money down, and they usually are easier to qualify for than conventional loans.
Are VA loan rates the same as conventional rates? Better? Worse?
Some days VA rates are better, some days they are worse. It depends on many market factors. However, VA loan rates are always close to conventional rates.
Does my credit score affect my VA loan rate?
No. Your credit score has no impact on VA loan rates. It can affect rates for a conventional loan.
If I filed bankruptcy, can I still get a VA loan? How long must I wait after filing?
Yes, you are still eligible for a VA loan. You must be at least one year out of Chapter 13 bankruptcy or two years out of Chapter 7. You also must have no late payments in the year leading up to applying for the loan.
Can a friend co-sign my VA loan?
Only spouses can co-sign on VA loans. However, other loans, such as conventional home loans and FHA loans, may allow a friend to co-sign.
As a veteran, will my VA loan entitlement ever expire?
Your entitlement never expires. However, your Certificate of Eligibility may need to be renewed if it is older than 12 months.
How much can I borrow with a VA home loan?
You may be able to borrow enough to cover 100% of your home purchase and could qualify for up to a $417,000 loan. In Alaska and Hawaii, the loan guarantee limit is $625,000. On a refinance you can borrow up to 90% of the appraised value of your home.
May I use a VA loan to invest in real estate?
A VA loan may only be used for a home that you intend to live in as your primary residence.
Are VA loans provided by the U.S. government?
The Department of Veterans Affairs does not actually loan the money for VA loans. It insures loans that VA-approved lenders provide, which allows borrowers to get loan amounts for 100% of the appraised value of a home.
What is an adjustable-rate VA loan?
An adjustable-rate loan starts off at a slightly lower interest rate than a fixed-rate loan. Most often it stays at this rate for three, five or seven years. After that, the interest rate changes every year to the current interest rate.
What is a fixed-rate VA loan?
A fixed-rate loan has an interest rate that stays the same. The interest rate at the time the loan is finalized is the interest rate for the life of the loan.
Do I need a down payment with a VA loan?
A VA loan covers 100% of the value of a home, so a down payment is not required. However, you have to pay any closing costs. But the seller can pay these closing costs for you up to an amount that equals 6% of the home’s value. This usually is more than enough to cover closing costs, so you can move into a home with no money out of pocket.
May I use a VA loan for a vacation home?
No, a VA loan can only be for your primary residence.
If I am on active duty, can I get a VA loan?
Yes, if the home will be your permanent residence and you are within 60 days of moving in.
My realtor has implied that VA appraisers do poor work. Is this true?
No. VA appraisers protect buyers. VA loans are government-backed, so VA appraisers need to make sure homes meet government safety and quality guidelines
Affects Loan Programs
- KHC will not purchase or close a loan without the RHS Conditional Commitment and tax transcripts.
- KHC will require a VOE within 10 days prior to closing.
- The only exceptions will be conventional loans for military personnel who use their Leave and Earnings Statement (LES), or if their employment was validated by Desktop Underwriter (DU) service and follows all conditions.
- KHC will follow agency guidelines that are in place during the partial federal government shutdown.
- If federal tax transcripts or validation of social security numbers are required per underwriting, or are listed as an automated underwriting engines (AUS) finding within DU, then applicants will be required to provide copies prior to closing or purchase of a loan.
If you have an existing interest-rate lock that will need an extension due to the partial federal government shutdown, please email your loan officer at the KHC lender handling your loan.