VA Loan Eligibility and Funding in 2022
The VA loan is an excellent loan product for those who are eligible. If you are unsure whether you are eligible to use a VA Loan, this article is for you.
Who is eligible for a VA Loan?
The best part about the VA loan is that it extends well beyond current active duty personnel. The VA loan is available to the following eight groups of people:
Active duty service members
Current National Guard or Reserve members who have been Federal active service
Discharged members of the National Guard who have never been activated for Federal active service
Discharged members of the Selected Reserve who have never been activated for Federal active service
Surviving spouses in receipt of DIC (Dependency and Indemnity Compensation)
Surviving spouses not receiving DIC benefits
This is the link to find out more information on whether or not you are eligible.
Types of Purchases a VA Loan Can Fund
While a VA loan is terrific in that there are no down payment requirements, there are strict guidelines that go along with it. The VA loan is exclusively for purchases that will be owner occupied. If you’re looking to purchase a property and use it as an investment rental, the VA loan cannot be used.
As defined by the VA, the loan can be used for these five types of homes. As mentioned above, all of these must be your personal home. The specific VA wording can be found here.
A home or condominium unit in a VA-approved project
A new construction home
Simultaneously purchase and improve a home
Improve a home by installing energy-related features or making energy-efficient improvements
Manufactured home and/or lot
Some Advice on Home Types
Be aware, the VA, FHA, and other government-approved loans have strict guidelines for condominium financing. Complexes with more than 30% rental units are not eligible for these programs. If you are looking to purchase a condo, make sure your agent is aware that you are using a VA loan so they can screen for VA approved complexes.
The VA permits you to purchase a single-family home, a duplex (2 units), a triplex (3 units), or a fourplex (4 units). The key is that you must reside in one unit, but you may rent out the other(s). The VA loan will include the revenue from the other units when determining your eligibility for this property. As a result, a buyer will frequently qualify for a higher price point when the property has permitted income producing units.
Understanding VA Loan Eligibility
Now that you've decided on the type of property you want to purchase, the next step is to determine how much property the VA loan will enable you to buy with no money down. This figure is determined by the area you are purchasing in and will vary.
We will connect you with our local lender to determine your eligibility and the VA loan limit where you are looking to purchase.
The important thing to know is that your VA eligibility is not your final loan amount. It is just the amount you can borrow with no money down. A lesser-known fact is that you can borrow more than the VA loan limit; you will just have to make a down payment.
What type of fees are associated with a VA Loan?
While the VA loan does not require a down payment or mortgage insurance, there is a funding fee. This helps cover the loan's fees and those who default. The finance charge varies according to the number of properties borrowed and rises as the number of properties grows. The financing charge can be financed into the loan. See below chart for details.
How to Waive the Funding Fee
If you have a VA disability rating, you may be eligible to have the charge waived or refunded. The following five groups can have their funding charge waived.
Veterans receiving VA compensation for service-connected disabilities
Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay
Veterans who are rated by the VA as eligible to receive compensation as a result of pre-discharge disability examination and rating or based on a pre-discharge review of existing medical evidence (including service medical and treatment records) that results in the issuance of a memorandum rating
Veterans entitled to receive compensation but who are not presently in receipt because they are on active duty
Surviving spouses of veterans who died in service or from service-connected disabilities (whether or not such surviving spouses are veterans with their entitlement and whether or not they are using their entitlement on the loan) — depending on your house price this could add up to a significant amount of money
3 Ways to Verify Your Exempt Status
Have a properly completed and signed VA Form (26-8937) and a Verification of VA Benefits indicating the borrower’s exempt status.
If you are a veteran who elected service retirement pay instead of VA compensation, you will need a copy of the original VA notification of disability rating and documentation of your service retirement income.
Indicate on the Certificate of Eligibility (COE) that the borrower is entitled as an unmarried surviving spouse.
Using a VA Loan to Fund Multiple Loans
The new VA guidelines allow you to purchase as many properties as you like as long as you do not exceed your entitlement. The entitlement amount, not the number of residences, is the limiting issue. It is critical to remember that your entitlement comprises both the purchase price and the funding fee.
How to Borrow More Than Your VA Loan
You can finance more than your VA loan amount with a VA loan. The important thing to remember is that anything beyond the VA loan limit requires a 25% down payment. For example, if you exceed your financing level by $10,000, you will be required to put $2,500 down.
Should you Exceed Your Entitlement?
VA rates are typically lower than most conventional rates, which makes this type of loan make sense even with the financing charge. It is critical to double-check all rates because they fluctuate. Even with the financing charge and down payment, this loan may provide a lower monthly than another form of loan, especially if the funding cost is removed.
For any questions, or to begin you VA loan pre-approval, send us a message today and we’ll get you started in the right direction!