Tag: va mortgage
The President is expected to sign H.R. 299, the ‘Blue Water Navy Vietnam Veterans Act.’ This legislation includes language which will eliminate the cap on the VA home loan guarantee.
- How to Apply for a Kentucky VA Loan
- Kentucky VA Funding Fee
- Kentucky VA Home Loan Credit Issues
- Kentucky VA Loan Credit Score Requirements
- Kentucky VA Loan Guidelines
- Kentucky VA Loan Requirements
- Kentucky VA Refinance Guidelines
- Loan Info
- Louisville VA Loan Closing Costs
- VA Links
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant Equal Opportunity Lender. NMLS#57916http://www.nmlsconsumeraccess.org/
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“Grossing-Up” Non-Taxable Income
Did you know that you can gross up non-taxable income?
You may gross up non-taxable income for income qualifying purposes. The non-taxable income source being “grossed-up” must be documented.
Non-taxable income refers to types of income not subject to federal taxes, which includes, but is not limited to:
- some portion of Social Security Income;
- some federal government employee Retirement Income;
- Railroad Retirement benefits;
- some state government Retirement Income;
- certain types of disability and Public Assistance payments;
- Child Support;
- military allowances; and
- other income that is documented as being exempt from federal income taxes.
The percentage to be grossed-up varies by agency:
- FHA – the greater of 15% or the appropriate tax rate for the income amount
- USDA – 25%
- VA – 25%
- Freddie Mac – 25% or the amount of the current federal and state income tax withholdings tables
- Fannie Mae – 25% or the amount of the current federal and state income tax withholdings tables
- Jumbo – 25% (see guidelines for specific restrictions)
Now let’s talk about what it takes to qualify for a mortgage.
First off, you’ll need an adequate credit score, along with sufficient income to make the proposed mortgage payment each month.
Generally speaking, a credit score below 620 is considered subprime in the mortgage world and will make qualifying for a mortgage that much more difficult. But it’s still possible depending on lender and loan type.
If you’ve got previous foreclosures on your credit report, things will get even more problematic and you may not even be eligible for a certain period of time.
But if your credit score is above 740 and you’ve got some decent credit history to back it up, you should have access to the lowest mortgage rates and a wide array of loan options.
Credit scores in between should still work, though there might be pricing hits associated, which all else being equal, may bump up your interest rate.
Tip: Lenders want to see a minimum of 3 active credit tradelines with two-year history on each to assess your creditworthiness.
As far as job history goes, it’s important to show the mortgage underwriteryou’ve had (and still have!) a steady job, typically for two years or longer.
This essentially proves that you will continue to receive regular income to make those costly mortgage payments each month for the next 30 years.
If you just graduated and have held a job for a mere two months, don’t expect to qualify for a mortgage unless your new position directly correlates with what you studied in school.
For example, if you went to medical school, and now have a job as a doctor, this might be sufficient to qualify for a mortgage.
But if you were an art history student who has been working as a flight attendant for two months, mortgage lenders probably won’t feel comfortable lending to you just yet. Make sense?
When seeking out your mortgage, you’ll also need to consider the mortgage down payment requirements, which vary depending on the type of loan you’re after.
While there are still some zero down mortgages around, namely VA loans and USDA loans, it certainly helps to set aside some assets so you’ve got something to put into your home purchase.
Obviously, the amount of money needed will also vary based on the purchase price of the home. If you want a more expensive house, expect to put more down in order to qualify.
If we’re talking about a mortgage refinance, you’ll need a certain amount of home equity to qualify for the mortgage, as determined by loan-to-value ratioconstraints.
Use Common Sense and Think Like the Mortgage Lender
- Would you approve YOU for a mortgage?
- If not, address those red flags immediately
- Don’t guess, run the actual numbers with a professional
- And ask plenty of questions if you’re unsure about anything early on
When it comes down it, it’s all pretty much common sense. Do you think you can/should qualify for a mortgage?
Do you have a track record of making on-time payments, carrying large amounts of debt and paying it down, holding a job, and saving money?
Are you ready to make a big commitment? If you were the bank, would you lend you a mortgage…hmm.
I would guess that most prospective homeowners could assess the situation beforehand and determine if they should be granted a mortgage.
But without running the numbers, you won’t know for certain. So be sure to do plenty of calculations and speak with a loan officer or two to see where you stand.
What You Need to Qualify for a Mortgage
Here’s a general list of what you need to qualify for a mortgage. Keep in mind that qualification requirements vary greatly by lender and loan type.
In some cases, you won’t need all of these things, but it should certainly make life easier to satisfy everything on this list.
- Credit History – minimum of 3 active tradelines with 2-year history on each (credit score minimums vary)
- Job History – at least 2 years on same job or in same line of work (recent graduates with new jobs in certain fields like doctors and lawyers may be exempt)
- Income – verifiable income (tax returns, pay stubs) for the past two years that satisfies debt-to-income ratio limits
- Assets – enough to cover down payment, closing costs, and at least two months of mortgage payments (known as reserves)
- Rental History – proof of clean rental history for the past two years is also important to show the lender you have a propensity to pay on time each month (those currently living with their parents may be excluded from this rule).
If you can’t satisfy these basic requirements, you may want to keep renting, saving, and working on your credit until you can.
Or consider adding a co-signer who is better qualified to apply for a mortgage.
Either way, don’t be discouraged. There are lots of home loan programs and creative options out there to suit all different needs. As noted, one lender may say no while another says YES.
Read more: Tips for first-time homebuyers.
Mortgage Loan Officer
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.