VA Loans Eligibility Criteria: Do You Qualify the Maze?

When it comes to the qualification criteria of traditional loans, veterans and other military service members are at a disadvantage due to the nature of their jobs. As they are often transferred from one place to another, it is difficult for their family members to get a steady job at one place -- leading to fluctuations in their credit score. To help them get a home of their own, the Department of Veteran Affairs, started VA loan program. These government backed loans offer equal opportunity to all qualified veterans to obtain finance for their primary residence. This brief read discusses four key essential elements required for VA loan approval.

Eligibility

To get approved of a VA loan, the borrowers must satisfy at least on the following requirements:

●       Veterans who have served during the WWII for required period

●       Service members who are currently on duty and fulfil minimum active duty service requirement

●       Certain Reservists and National Guard Members

●       Surviving spouses of deceased veterans

Property Entitlement

According to guidelines stipulated under VA loan, the benefit of the loan can be availed only for owner-occupied properties. The list of property eligible for VA financing include:

●       Single-family homes

●       VA-approved condos

●       Townhouses

●       Multi Family homes

In addition to this, VA also includes financing for modular homes if they are used as permanent residents; however, not all lenders offer VA loan for them.

Owner Occupancy

According to law, VA borrowers must occupy the property, for which they have applied for a loan. VA borrower is required to give in written the proof that they will occupy the home within a reasonable time. The time flexibility given to borrower is within 60 days of closing. Borrowers deployed far from the place are given the extension of 12 months. In the absence of borrower, the only spouse is eligible to satisfy the occupancy requirement in a VA-eligible borrower’s stead. Borrowers qualify for refinance loans only when they have occupied the home in the past.

Income & Credit

Though there is no fixed credit score limit stipulated under VA loan, the lenders are given some flexibility to decide whether a borrower is a safe lending prospect within VA guidelines. The VA, however, recommends borrowers have no more than 41% debt-to-income ratio and sufficient residential income to sustain living expenses. Having said that, refinancing in VA loan doesn’t require income and credit re-qualifying.

Conclusion

As bankers are tightening their lending standards, the market has witnessed a surge in demand for VA loans. To qualify for a VA loan, the borrower must have sufficient income, suitable credit and a valid certificate of eligibility. Once approved the loan amount may vary depending on borrower’s entitlement and ability to pay.

Mortgage Refinance Programs: All You Need to Know

When home mortgage rates drop, it is natural for home mortgage borrowers to go for refinancing programs. This way, they reduce the amount of interest paid on home loans, which forms a notable part of their financial obligations. Although refinancing has its pros and cons, knowing the right time and the type of refinancing program help you take a right decision. In this article, we have discussed some refinance programs available and their finer lines.

Federal Housing Administration Streamline

Federal Housing Administration (FHA) Streamline refinance program is an ideal option for the borrowers who have an FHA mortgage. The program is an alternative to traditional FHA mortgage with better terms and low monthly payments. FHA loan approved borrowers do not need to submit new documents stating financial situation or new income qualification for FHA streamline refinance program. This type of refinancing also doesn’t require any:

●       Home appraisal

●       Termite inspection

●       Credit report

The only little drawback with FHA streamline program is that it doesn’t allow a cash out.

Veteran Affairs Streamline

Similar to FHA refinance, Veteran Affairs (VA) streamline refinance program has lower interest rate than the original VA loan. Again, you must have a VA loan to qualify for the VA streamline refinancing and should go for it, only if it is available at low rates. Moreover, some VA loan lenders may require an appraisal and credit report for VA streamline refinancing.

Home Affordable Refinancing

This type of refinancing option is specifically for borrowers who were not able to avail FHA or VA refinancing due to the depreciating home value. This type of refinancing program increases the long-term affordability of loans, saving borrowers from a foreclosure if they are unable to repay the loans on time. Borrowers make the most of Home Affordable Refinancing if their mortgage is securitized either by Fannie Mae or Freddie Mac. Moreover, borrowers must be up-to-date with their current payments, and the income must be enough to afford a new mortgage.

Conclusion

Any good refinancing program applied during a period of low-interest rate should benefit the borrower by lowering their monthly housing payments and shortening the mortgage term. Borrowers, however, need to be careful while taking the advantage of such refinance programs as there are complexities that can trip a poorly informed borrower and result in a raw deal. It is always advisable for borrowers to consult refinance experts before signing the dotted line.

7 Elements You Need to Know Before Refinancing VA Loans

The IRRRL or Interest Rate Reduction Loan refinancing program is a great option for military people looking to decrease their mortgage’s interest rates. Not only the program requires minimum documentation, but also allows borrowers to pay less monthly payments and decrease their total loan term. However, in order to understand VA loans guidelines comprehensively, when it comes to refinancing, you need to first study a few elements. Here’s a brief mention of what you all need to know before refinancing your VA loan.

Interest Rate

The first condition in order to refinance a VA loan is that interest rate on the new loan must be lower than the existing loan’s interest rate. Ideally, this figure should be, at least, 1 percent lower than the interest rate you are already paying on your existing loan.

Cash Proceed and Home Equity

Refinancing a VA loan under the IRRRL scheme curtails you from utilizing any cash benefits, however, you may take a loan of up to $6000 for energy efficiency improvements. Given this, if your mortgage is $110,000, you cannot add on $40,000 for a remodeling project from the home’s equity.

Certificate of Eligibility

In order to apply for a VA loan, you need to first acquire a certificate of eligibility. This, however, is not the case when refinancing a VA loan under the IRRRL program. The reason, lenders can automatically receive confirmation about certificate of eligibility from the U.S. Department of Veterans Affairs.

Credit Check and Appraisal

Lenders may require everything from a home appraisal, debt-to-income ratio, income verification and credit check, when refinancing a VA loan. The U.S. Department of Veterans Affairs, however, does not require any such documents when refinancing a VA loan under the IRRRL program.

Availability of Refinance

Refinancing under the IRRRL program is only available for people who already have a VA loan. Given this, if you have a conventional or a FHA loan, you cannot refinance a VA loan under IRRRL to get low rate interest benefits.

No Upfront Fees

Though refinancing under the IRRRL accompanies a funding fee not more than 0.5 percent of your total loan amount, this can also be financed and added to the total loan balance. Consequently, borrowers are not required to pay any kind of upfront fee.

Refinance with any Lender

Contrary to common notion, it is not mandatory to refinance your VA loan from your existing lender. The VA guidelines do not restrict you from seeking a different lender to refinance your VA loan.

Conclusion

Refinancing your existing VA loan harvests many benefits that, include no down payment, no private mortgage insurance, and low rate of interest. To, however, get the most out of your refinanced loan, it is imperative to understand all the details and rules that govern this loan. In case of any doubts, it is always better to consult a professional loan officer, who can help you with everything you wish to know, and advise the best plan as per your specific needs.