Using a VA Loan for Multi-Unit Properties

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VA Loan Multi-Unit PropertiesVA loans are mortgage loans used by veterans and their family members to purchase a home. The loans are backed by the Veterans of Foreign Affairs.

VA loans are typically used to purchase a residential home for an individual or family. However, there may be other situations when a buyer uses a VA loan, for example multi-unit properties.

Purchasing Multi-Unit Properties

While the buyer cannot use a VA loan to purchase investment property like a rental unit. The veteran may use it to buy multi-unit properties.

According to VA regulations, investment property is property that the home buyer does not live in as a primary residence. Therefore, in order for a VA loan to be used to purchase multi-unit properties. The buyer must occupy one of the units even if the property isn’t bringing in any income.

In addition, the qualified buyer may not buy the property, live in it for a while, move out and then later use it as rental property. The requirement of living in the property is a legal binding contract between the buyer and the VA.

Are Income Qualifications Different for VA Loans for Multi-Unit Properties?

Buyers who purchase multi-unit properties often do so with the intent of renting them to generate income.

While it’s perfectly within their right to do this, as long as they continue to occupy one of the units, they shouldn’t do so with the intent of using future income to meet the income qualifications for the VA loan. This is not to say that the income can’t necessarily be used.

However, lenders are not going to just take the buyer’s word regarding income. If the buyer intends to use the income to help satisfy the income qualifications, he or she must provide the VA or lender with documentation of the buyer’s history as a landlord.

Because lenders may vary with their requirements, the buyer is advised to speak with the lender ahead of time to learn of any requirements the bank may have.

Additional Requirements Set by VA

Agreeing to live in one of the units is not the only requirement that must be met by the potential buyer (the veteran).

To prevent and help veterans and other buyers from buying properties that are not sanitary, sound or safe, the Department of Veterans Affairs has set Minimum Property Requirements (MPR) that the property must satisfy according to an independent VA appraiser.

These include the following.  

  • Residential property – Property must be used primarily for residential living.
  • Living space – The property must give the borrower and family members enough space to live, sleep and cook comfortably.
  • Water and sanitation – The property must show proof of a working water heater and sewage system as well as clean and safe drinking water.
  • Heating system – Heating system must produce heat in the interior reaching at least 50° Fahrenheit. If wood-burning furnaces or solar systems are used as heating sources, there must also be a backup heating source.
  • Mechanical infrastructure – The electricity, water, heating/cooling system, and other mechanical systems must in good working order and indicate they will be that way in the near future.
  • Architectural infrastructure – Roofing must be in good shape and indicate it will continue to be good for a designated number of years. Attics, crawl spaces and basements must not have water damage and must provide adequate ventilation. The foundation must be leak-free and sound.
  • Property Accessibility – Property must be street-accessible by a permanent easement or a year-round driveway.
  • Pest inspection – The home must pass a pest inspection. According to VA regulations, the fee for the pest inspection is not to be paid by the buyer.

If you are interested in purchasing a multi-unit property with your VA loan benefit, your best option is to contact a VA loan specialist, who can help you through all the red tape and help make your dream a reality.

VA Loans

4 Types of VA Loans

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4 Types of VA LoansBuying a new home can be an exciting yet stressful experience, whether it’s your first home, second or even third. When you’re taking out a mortgage loan, it can be even more complicated. Luckily for veterans and military personnel, they have VA loans available to them.

Whether you’re making your first home purchase or refinancing your current mortgage, it’s important that veterans know the types of VA loans available. Here are four types of VA loans.

  1. VA Purchase Loan

The VA purchase loan is probably the most common type of VA loans. This loan allows veterans who meet the eligibility requirements to purchase a home without having to worry about having a down payment.

About the only real requirements, other than being a veteran or spouse of a veteran, are that the borrower must meet the income and credit requirements and must also use the home as his or her primary residence.

  1. Streamlined VA Refinance

The streamlined VA refinance loan, also known as Interest Rate Reduction Refinance Loan, is a mortgage loan that allows the veteran to take advantage of lower interest rates.

This loan is very advantageous to veterans because it not only offers lower interest rates but also allows the veteran to have lower monthly payments and possibly not have to pay closing costs.

The lender may offer to pay for the closing costs in exchange for slightly higher interest rates. The buyer may choose to take the lower interest rates and include the closing costs right into the loan.

  1. VA Cash-out Refinance

The VA cash-out refinance loan is a mortgage loan that allows veterans to take advantage of lower interest rates and get cash out of the equity of their home.

The home’s equity is how much the home is worth in terms of a home appraisal. For instance, if a veteran owes $80,000 on a home that’s worth $120,000, the veteran has $40,000 in equity. The $40,000 is the amount the borrower can take out in cash.

Some lenders won’t allow borrowers to take out more than 80 percent of the home’s equity while others may allow them to cash out 100 percent. Lenders may vary in their lending policies.

Veterans interested in a cash-out refinance will have to submit a Certificate of Eligibility to the lender.

  1. VA Rate-and-Term Refinance

The VA rate-and-term refinance is a mortgage loan that gets its name based on what it does. It allows the veteran to refinance a current mortgage to either change the interest rate or the term of the mortgage.

It differs from a cash-out refinance in that the borrower cannot take any cash out of the home’s equity. The loan balance basically stays the same.

If the veteran owes $100,000 on the loan, he or she will continue to owe this amount after the refinance. The only difference will be in the interest rate and the term of the loan.

Often, first-time borrowers take out mortgages with long terms, like 30 years, to have lower monthly payments. After paying on the loan for a few years, the individual may be in a better place financially and want to go with a shorter term.

However, the individual may choose to stay with the 30-year mortgage and take advantage of lower monthly payments resulting from the lower interest rates.

 

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What Are Seller Concessions?

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What Are Seller Concessions When Buying a Home With a VA LoanBuying a home can be a complicated transaction. What initially appears as a simple transaction may get somewhat complicated when you factor in closing costs, loan fees, and whatnot. Suddenly it appears the asking price isn’t what you originally thought.

Seller concessions can be helpful in situations such as this. Learn about seller concessions can help you when buying a home with a VA loan.

What Are Seller Concessions?

Seller concessions are contributions the seller agrees to make at the closing of a mortgage loan. Buyers often don’t realize how loan fees and closing costs can add up and change the amount of the loan.

In some situations, where the closing costs are high, a buyer may have to cancel the loan because of the final price being too high.

Seller concessions can help the home buyer go through with the loan because the seller is agreeing to pay many or all the additional fees. Depending on the type of loan, there may be a cap on the amount of concessions the seller can pay for the buyer.

What Type of Fees Are Included in Seller Concessions?

The types of fees that are included in seller concessions may also vary by the type of mortgage loan. Keep in mind that there are various types of mortgage loans, including VA, Freddie Mac and Fannie Mae, USDA, FHA and conventional mortgage loans.

Closing costs typically can include transfer fees, loan processing fees, title insurance costs, appraisal fees and transfer fees, among others.

When dealing with VA loans, the seller concessions may only go towards the following:

  •                Paying the buyer’s VA funding fee
  •                Prepayment of insurance or taxes on the home
  •                Paying extra points above two percent of the loan
  •                Providing escrow funds to give buyer a temporary interest rate buy down
  •                Paying off some of borrower’s bills or credit accounts
  •                Gifts from the buyer such as appliances

Generally speaking, seller concessions do not just include the typical closing costs but often go beyond that amount. While there may be a maximum percent of seller concessions a buyer can ask the seller to pay, this does not include the loan-related closing costs. The concession is like an extra bonus.

VA Loan Seller Contribution Maximum

The amount that may be included in seller concessions also varies by loan type. Each loan type has their own maximum amount.

For instance, while USDA loans and FHA loans set their max at 6 percent, conventional loans can go anywhere from 2 percent to 9 percent. Some of it may also be dictated by individual state laws as well.

In the case of VA loans, seller concessions cannot be higher than 4 percent of the loan amount. If the loan amount is $150,000, the seller concessions cannot be more than $$6,000.

Keep in mind, though, that while the seller may be limited to only paying $6,000 in concessions, the seller may also pay an additional amount towards customary loan costs. This total can add up to a lot and be a real savings to the buyer.

Here is an example of how this might work. Say the buyer’s closing costs for things like loan origination fee, title insurance and appraisal come to 2% of the purchase price. The buyer agrees to pay the VA funding fee, insurance, taxes and pay off some of the buyer’s old debts. This amount totals 3% of the sales price. Although the total paid by the seller equals 5%, it’s allowed because only 2% is actually going towards the closing costs.

 

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2018 VA Loan Limits in Arizona

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Big news for 2018 VA Loan Limits in Arizona. They have gone up, yet again! 2018 Arizona VA Loan Limits for Maricopa County have increased from $424,100 (2017) up to $453,100 with no money down. This mean Veterans and Active Duty Military can finance more with no additional money out of pocket. Our VA Home Loan Benefit is the only 100% financing with no money down and no private mortgage insurance home loan available on the marketplace. This increase makes the VA loan one of the most competitive loans available for Veterans today.

Did you know that the VA does not actually have a maximum VA Loan limit? They just have a maximum loan amount with no money down. The VA will allow us as Veterans to finance more than $453,100 by putting down 25% of the difference between the purchase price and the 2018 Arizona VA Loan Limits of $453,100. This is an incredible opportunity for Veterans seeking financing above the $453,100 threshold with no money down.

2018 VA Loan Limits do not just apply to purchasing a home. The good news is that if a Veteran would like to use the VA Loan for the purpose of a refinance, they too are eligible for the increased loan limits as well.

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VA Loan Limits

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VA Loan Limits with no money down vary from county-to-county across the nation. However, in most counties across the nation the max VA Loan Limit with zero down is $424,100.

There are many ins-and-outs of the VA Loan. After serving Veterans for many years one thing that I have learned is that the VA does not advertise the VA Loan program leaving us (the Veteran) to seek out the information regarding our loan that we have earned and deserved.

There are some circumstances where the VA allows Veterans to have higher VA Loan Limits. For example in some counties across the nation like Alameda-County California, the max VA Loan Limit is $636,150 with no money down. If you are up for a 5 hour drive south (okay maybe longer) down to San Diego the VA Loan Limit with no down payment is $612,950. So do you see how the max VA Loan Limits change dependent upon where you go?

Remember fellow Veterans that the VA does not lend the money, they just insure the loan. So just because the VA might say we eligible for that amount we still have to qualify from a monthly income, and credit perspective.

For more information about how VA Loans work and what current VA Loan Limits are in your county feel free to contact us today.

Semper Fi!

Jimmy V.

480-800-Vets (8387)

VA Loans

Bad Credit Rating – Can I Get A VA Loan?

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Can I Get A VA Loan With a Bad Credit Rating?

Bad Credit ScoreWhile most VA home loan requirements are looser than those set by traditional banks, the VA still has some requirements when it comes to borrower credit score. If you would otherwise qualify for a VA mortgage, but have a bad credit rating, there are still ways to qualify for a loan that meets your budget and needs.

Buying a home is a very major personal and financial commitment. When buying a home, one of the biggest choices that you will have to make is picking a mortgage. For those that are members of the VA, or active military members, a great mortgage option would be to take out a VA home loan. VA home loans have a variety of approval criteria, which are generally not as tight as those set by most mortgage lenders.

Get a Co-Signer

One of the best ways to get a VA home loan if you have a poor credit score is to get a co-signer to sign onto the mortgage. A co-signer is an individual that will take on the financial responsibility of the mortgage if you miss some payments.

Since there is another person that is taking on the financial requirements of the loan, the VA home loan lenders will be willing to take their financial situation into consideration. This will include reviewing the co-signers financial position and credit score.

Normally, it would be ideal if the co-signer were someone that will be living with you, such as a spouse or other family member.

More Money Down

One of the reasons why the VA takes credit score into consideration is because they often provide loans with as little as zero money down. While this is a great advantage for veterans that may not have a lot of cash saved, it does add risk to the lender and servicer.

If you have a bad credit rating and are not able to qualify for a traditional zero-down loan with the VA, a good option may be to put more money down instead. While it is not necessarily within their policy, if you are able to put down up to 20% of the purchase price, the lender may be willing to look past the poor credit score and approve you for the loan. However, you may still be charged a higher interest rate and fees.

Wait and Rebuild Credit

The last option that you may have for getting a VA home loan is to wait to buy the home and look for ways to rebuild your credit in the meantime. VA home lenders normally want their borrowers to have a credit score of 620.

If your credit score is in that range, it likely will not take too long to improve it to the 620 level. There are some easy and fast ways that you could improve your score, which would include paying down credit cards, opening a secured loan and show quality payment history for a few months, or have negative fraudulent information removed from your report. These tasks could lead to a quick improvement in your overall score.

Call Jimmy Vercellino – VA Loan Specialist

As an award-winning, nationwide loan originator specializing in VA loans, I can help you qualify even if you have a bad credit rating, or help you increase your credit score so you will qualify for a VA home loan. Contact me today!

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Buy Land with VA Loan?

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Can I Use My VA Home Loan to Buy Land?

Using Your VA Loan to Buy Land and Build a HomeThe Department of Veterans Affairs allows borrowers to use a VA home loan to buy land and construct a new home on a piece of property as an alternative to buying a pre-built home.

There are restrictions placed on the way the funds can be allocated. VA loans must be used for eligible purchases, which allows the Veteran to “purchase or construct a residence, including a condominium or cooperative unit, to be owned and occupied by the veteran as a home.”

The loans can include the land where the home will be situated and may also be guaranteed for the construction of a residence on land the borrower already owns. It’s also possible to use the funds to refinance a purchase money mortgage or contract for the purchase of the land.

Restrictions

The VA home loan to buy land cannot be made under the VA program for unimproved land with a future intent to improve.

The loan also must be closed before construction can begin to allow the money to be allocated to pay for the land the home will reside on with the remainder placed into an escrow account.

This gives the bank the authority to distribute the funds and ensures that the builder can receive payment during construction.

This isn’t only applicable to those who want to buy land that is for sale. If you meet the requirements for a VA loan, land that you already have in your possession qualifies for funding under the program.

The simple answer to whether you can use a VA home loan to buy land is yes. It can’t be in a flood zone, in an airport noise zone, and must be away from high volt electric lines or unstable land conditions where landslides, sinkholes or earthquakes are common.

Finding the Right Lender

The primary problem you might find with using a VA loan for construction is locating a lender who will allow these types of loans for construction. There are no regulations in place that require lenders to finance construction loans.

You might have to try approaching a few different lenders before you’ll find one that is willing to work with you on the project.

In some cases, it is necessary for you to first get a conventional loan from a community lender or builder for the initial financing, and when construction is complete, refinance it under the terms found in the conventional VA loan.

The best way to ensure that you don’t waste your time applying for financing that isn’t relevant to your home-buying needs is to ask the lender questions right from the start.

If you don’t find what you’re looking for the first time, do research and locate a lender close by that will offer financing to put you in your dream home once and for all.

Better yet, call me – I can steer you through the process and help you find the right VA home loan at the best interest rate.

 

VA Home Loans

Home Improvements VA Loan

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Can I Get a VA Loan for Home Improvements?

Home Improvements VA LoanIt’s common for veterans to want to know if there is a VA guaranteed home loan available for home improvements. The answer depends on whether you want to buy a new home with a VA loan or you already have a home.

Unfortunately, the VA does not offer as simplified a loan program as the FHA’s 203k loan program, which offers higher loan amounts to cover rehab.

Here are instances in which you may be able to use a VA mortgage for home improvement projects.

VA Energy Efficient Mortgage

An Energy Efficient Mortgage (EEM) is a specialized loan that’s made alongside a standard VA home loan for an existing home you want to buy or a refinance loan for your primary residence to make energy efficient home improvements.

The EEM program is a bit confusing, however. To use an EEM, you need to make an offer on a home and request additional funds to make energy efficient home improvements once you’re under contract.

There are a couple of common tiers for this program:

  • Improvements up to $3,000. This tier is the easiest to qualify and you will usually need a copy of a contractor bid or quote that itemizes the costs and manufacturer information for each item that will be installed.
  • Improvements of $3,001 to $6,000. This level of improvements also requires an energy audit that shows a year’s worth of utility averages for the home you’re buying. This audit will be reviewed to determine if your proposed improvements will make enough of a difference in energy use.

With an EEM, you can get up to $6,000 more on a loan in addition to your VA loan to make improvements to your home. The downside is not all upgrades will qualify.

Examples of acceptable improvements include furnace modifications, insulation, storm doors and windows, and thermal windows. Items that don’t qualify include air conditioning units, roof replacement, and vinyl siding.

VA Rehab Loans

A VA home loan can be used to not only buy a home but simultaneously purchase and improve a property. In general, the VA requires that a home be in move-in ready condition.

While it is possible to get a VA loan on a home that needs work, this requires finding a lender that makes these uncommon loans as well as a VA-approved contractor. The plans and specifications for all home improvements must be itemized by the contractor with an estimate for how long the improvements will take.

VA Cash-Out Refinance

If you already own your home and want to make improvements, a VA cash-out refinance may be a good choice. A cash-out refinance involves adjusting the interest rate on your loan with the option to take money out from the equity in your home. The money can then be used to finance home improvements or anything else.

A VA refinance can even be an option if you have a non-VA loan now and want to refinance into a VA loan while cashing out some of your equity.

Alternate Solution: Refinance Into a VA Loan

There is one final option that may be the best choice if you want to buy a home that needs significant work and ultimately end up with a VA mortgage.

VA rehab loans are uncommon, although the FHA 203k loan and USDA rehab loan programs may be a good option. Some qualified veterans choose to use a FHA 203k loan or other rehab loan option to purchase and fix a home before refinancing into a standard VA loan.

The downside of this option is it results in higher costs. The first mortgage will come with closing costs and likely a higher interest rate for a period of time.

 

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VA Home Loans

How Do VA Loan Rates Differ?

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Getting the Best VA Loan Rates

VA Loan RatesBuying a home is a very big financial commitment. So of course you want to find the best VA loan rates available.

When you are looking to buy a home, one of the most important factors involved is the type of mortgage that you receive. For those that are members of the US Armed Forces, or are prior members, getting a mortgage through the VA could be a great option.

VA home loans provide borrowers with several different benefits. VA home loans are fully guaranteed by the VA, which gives the providers of the loans another source of repayment if the loan goes into default.

Because of this, VA home loan providers have lower requirements for borrowers to meet. For example, the VA offers loans with no money down, has lower income level requirements, and does not require a high credit score.

While VA home loans have lower requirements, they can be more expensive for borrowers. On average, home loans from the VA have higher interest rates for several different reasons. The actual rate that you will receive on your VA home loan will depend on a few different factors.

Your Credit Score Affects VA Loan Rates

The first factor that will determine the rate that you receive on your VA home loan is your credit score. While the VA usually only requires a credit score of 620, those that are looking for a more affordable interest rate will need to have a higher credit score than the minimum.

For those that are looking for the best VA loan rates possible, a credit score of 720 or higher will be required. While it is important that you have a good credit score, your interest rate could be improved if you have a co-signor that also has a good credit score.

Down Payment

When you are looking to get a loan through the VA, another factor that will impact your credit score is the level of down payment that you have. In most cases, the VA will approve a loan with as little as zero percent down. However, these loans are still considered riskier by the VA and the lender. Because of this, you will be charged a higher interest.

If you are looking for the lowest rate and fee structure possible, it would be beneficial for you to put down at least twenty percent. This will also reduce your initial principal balance, which will reduce your overall payment even further.

Income Thresholds

Another benefit of getting a loan through the VA is that they have looser income requirements for borrowers. Most traditional lenders want to have a borrower have a debt to income ratio of 33% or less. VA home loan providers will offer loans with much higher ratios.

While they are willing to offer these riskier loans to borrowers with lower levels of income, these VA loan rates are higher to compensate for the additional risk. Those that choose to buy more affordable homes will end up being offered a lower overall interest rate.

 

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Am I Eligible for a VA Loan? Find Out Now

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Am I Eligible for a VA Loan?

Am I Eligible for a VA LoanBeing eligible for a VA loan is a great possibility if you have served in the armed forces, but being a vet is only the first test.

Veterans appreciate gestures of gratitude for service rendered to their country. These can take the form of verbal acknowledgement or show up as a financial donation to aid wounded warriors.

The government also provides benefits that demonstrate the high value placed on military service. Most well-known are medical services yet there is another form of assistance of equal significance. The United States Department of Veterans Affairs (VA) guarantees home mortgage loans for qualified borrowers.

How Do VA Loans Work?

Vets apply for mortgage loans like everyone else: through a private bank or finance company. Important to remember is the fact that the government is guaranteeing the loan, i.e. agreeing to pay the lender in the event the borrower defaults, not advancing the money itself.

For starters, the bank will require a VA Certificate of Eligibility (COE) before considering an applicant eligible for a VA loan. COEs are issued based on years and character of military service, and are obtained through the lender, a local VA office or the VA website. Subsequently, the lender will collect documentation to verify the information on the loan application.

The difference between the VA loan and a conventional mortgage is that underwriters will apply VA standards in approving or denying the application.

Do I Need Good Credit?

Yes, but it’s all relative. Whereas a conventional mortgage will require a strict minimum credit score of 620, applications with a VA guarantee are likely to receive more latitude since the bank knows it will be paid back one way or the other.

Overseas deployments and frequent relocations can take a toll on a veteran’s finances, so the VA requires banks to look at the whole borrower profile before rejecting an application based on credit scores.

How Much Do I Need to Earn to Be Eligible?

A borrower’s revenues will rise and fall on how much money is sought. When underwriting mortgage loans, lending institutions rely on an index called the debt-to-income ratio. This means that they will tabulate all the monthly obligations—in other words, the bills—and add the proposed monthly mortgage payment.

If this sum is less than 41 percent of the veteran’s total income, the bank is then confident that the borrower makes enough money to manage the loan payments.

Do I Need Money in the Bank?

It is not unusual for a finance company or bank to desire a financial cushion to carry the mortgagor through hard times. However, VA loans require only sufficient funds on hand for the down payment, closing costs and any additional equity not covered by the down payment.

Are There Any Restrictions on the Property?

The veteran might meet all the criteria and is eligible for a VA loan, but the loan can fall through if the house does not show clear ownership title for the seller or current owner. Unlike conventional loans, the bank can loan up to 100 percent of the property value when processing a VA application.

As a VA Loan Specialist, I can help you navigate through the VA loan process. Contact me or click the big red Apply Now button and let’s get started.

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