VA Home Loans in Arizona

VA HOME LOANS in Arizona - NO Down Payment Required

VA, also known as the Department of Veteran Affairs, offers to qualifying current and ex-members of the Armed Forces (to include the Reserves and National Guard) guaranteed mortgages up to 100% of the value of the property they are purchasing. Based upon a person's "eligibility", home loan amounts can be as high as $417,000 in Arizona.

VA home loans are fixed rate mortgages with terms of either 15 or 30 years. Since the VA guarantees the mortgage, there is no mortgage insurance. However, the VA requires the borrower to pay a funding fee ranging from 0.5% to 3.3% for the mortgage (this fee is waived for qualifying disabled veterans). In addition, VA home loans are fully assumable by a qualifying borrower. VA guaranteed loans are made by mortgage lenders, such as Sun Nations Mortgage. If the home loan is approved, VA guarantees the loan when it is closed. The guaranty means the lender is protected against loss if you or a later owner fails to repay the VA home loan.

SCROLL DOWN OR CLICK ON THE TABLE OF CONTENTS:

HOME BUYING:

• VA Home Loan Program Highlights
• Am I eligible for a VA Loan
• Why choose a VA Loan
• How to Buy a house with a VA Loan
• Home Buying Checklist
• How to find an agent
• Buying Considerations
• Request your certificate of Eligibility

HOME SELLING

• Selling considerations
• VA Loan Assumption

REFINANCING

• VA Rate Reduction Refinance Loan - IRRRL
• VA Cash Out Refinance

VA LOANS

• VA Programs
• VA Energy Efficient Mortgages
• VA Forms

VA UNDERWRITING

• VA Eligibility
• Credit
• Income
• Compensating Factors
• Closing Costs
• Funds to Close
• Documentation
• Funding Fee

VA Home Loan Programs

The following are highlights of the VA program in Arizona:

Down payment requirements: Since this mortgage is guaranteed by VA, the minimum down payment required is 0% of the sales price. Veterans are allowed to put money down on the purchase (which subsequently reduces the required funding fee).

Cash reserves-No cash reserves are required.

Income and employment: There are no limitations placed upon income requirements. As for employment, there are no limitations on a specific length of time at a particular job. However, a 2 year history is required, preferably in the same line of work (education can be counted towards this 2 year history if it is for the same profession the borrower is currently in).

Eligible properties and occupancy requirements: VA home loans are restricted to single family residences that are new, under construction, or existing (i.e. resale properties), condominiums, and townhomes. Homes located in a PUD (planned urban development) must be approved by VA. Also, mobile homes with a permanent foundation, taxed as real property, and built after June 16, 1976 are eligible. All VA guaranteed properties must be owner-occupied and located in the United States.

Closing Costs: VA has created a list of allowable and non-allowable closing costs that may be charged to the home buyer. Non-allowable closing costs generally are referred to as "garbage fees" or "junk fees" and include costs such as the lender's tax service or document preparation fees. The seller is required to pay the non allowable fees or the home buyer can pay up to 1% of these fees if there is no origination charge.

Qualifying ratios: VA does not limit a borrower's monthly payment as in the case of many mortgage loan programs. However, a borrower's total debt (proposed monthly payment plus monthly payments towards credit cards, student loans, car payments, and other installment and revolving credit) cannot exceed 41% of their gross monthly income.

Mortgage Insurance Premium: VA home loans do not have mortgage insurance premiums. However, the VA does require a funding fee assessed with each VA loan (unless you are a qualifying disabled veteran).

Assumability: Yes. The person assuming the loan must credit qualify for the mortgage and the seller is automatically released from liability with the approval of the lender

Am I Eligible for a VA Home Loan?

VA home loan eligibility is restricted to U.S. service personnel currently on active duty or honorably discharged from the military to include the Army, Nave, Air Force, Marine Corps, Coast Guard, the Reserves and National guard after either;

• 90 days or more, any part of which happened during wartime, or
• 181 continuous days or more that happened during peacetime.

Two year requirement:  More time is required for veterans who:

• enlisted and service began after Sept. 7, 1980, or
• entered service as an officer after Oct. 16, 1981

These veterans must have finished either:

• 24 continuous months of active duty, or
• the full period for which called or ordered to active duty, but not less than 90 days which any days during wartime or 181 continuous days during peacetime

 

Wartime and Peacetime refer to following periods of service

Wartime	Peacetime
World War II  9/16/1940 - 7/25/1947	Post World War II Period  7/26/1947-6/26/1950
Korean Conflict  6/27/1950-1/31/1955	Post Korean Period  2/1/1955-8/4/1964
Vietnam Era  8/5/1964-5/7/1975 The Vietnam era begins 2/28/1961 for those who served in the Republic of Vietnam	Post Vietnam Era  5/8/1975-8/1/1990
Persian Gulf War  8/2/1990- date undetermined

Member of the National Guard or Reserves for a minimum of 6 years. 

You may also be determined eligible if you: · were discharged for a service-connected disability, or · were discharged for the convenience of the government after completing at least 20 months of a 2-year enlistment, or · completed not less than 90 days (any part during wartime) or 181 continuous days (peacetime), and · were discharged because of a hardship, or · were determined to have a service-connected compensable disability, or · were discharged or released from active duty for a medical condition which preexisted service and has not been determined to be service-connected, or · received an involuntary discharge or release from active duty for the convenience of the Government as a result of a reduction in force, or · were discharged or released from active duty for a physical or mental condition not characterized as a disability and not the result of misconduct but which did interfere with your performance of duty ·

SPOUSES; are an un-remarried spouse of a veteran who died while in service or from a service connected disability, or · are a spouse of a service person missing in action or a prisoner of war.

Congress has in the past granted veteran status to groups other than our armed forces, such as, members of the Public Health Services, cadets at the service academies, merchant seaman, etc.  You should contact the VA Eligibility center to determine if you are eligible.

There are exceptions to the length of service requirements outlined above,   Because of the complexity and number of exceptions, you should not assume you are not eligible.  Instead, you should make application and let the VA have the final word regarding your eligibility.

How to obtain your Certificate of Eligibility

It used to take 30-45 days by mail to receive your certificate of eligibility.  Now you can go online and get it in a manner of minutes.  

REGISTER FOR THE PORTAL:

STEP 1:  Get a username and password by going to the Veterans Information Portal at:  https://vip.vba.va.gov  Select "User Registration" on the left side of the screen by double clicking.

STEP 2: Answer the questions that come up on the User Registration Screen.  Most will answer YES to question one and NONE to question two.  Once complete, click the NEXT button to continue.

STEP 3: Enter all of the information that is required.  The red asterisk denotes all fields that are required.  Be sure the answer the questions completely and accurately.  They should match your DD214 or your statement of service.  If you served under a different last name then make sure you answer yes to the last question. Once complete, click NEXT.

STEP 4: Enter Contact information.  If you would like to receive your information by email.  Make sure and answer YES.  Click NEXT to continue.

STEP 5: Enter information on the Login/Security Information Screen.  Click NEXT to continue

STEP 6:  Read the terms and conditions.  Once read, click the "I Accept"  then "submit" to process your request.  You will receive an email confirmation.

GET YOUR CERTIFICATE:

STEP 1;  Log into the VIP Portal.  https://vip.vba.va.gov

STEP 2:  Obtain your Certificate of Eligibility by double clicking on click "HERE" in the body of the text labeled "My home loan benefit eligibility and entitlement"

STEP 3:  You may now View and Print your Certificate of Eligibility

  Why Choose a VA Home Loan to Buy a House?

As a qualifying veteran for the VA home loan program, the government has afforded you a unique opportunity to purchase a home. However with every decision, there are pros and cons to this opportunity. Review the following information before deciding if a VA loan is right for you:

PROS:

• VA home loans do not require a down payment, unless the purchase price is more than the appraised value or in excess of $417,000. 
• VA home loans have a negotiable fixed interest rate that is competitive with conventional mortgage financing. ·
• VA home loans have limitations on which closing costs may be assessed to the veteran.
• VA home loans have long amortization (repayment) terms
• VA home loans may be prepaid without penalty
• VA home loans may have forbearance extended to worthy VA homeowners experiencing temporary financial difficulty
• VA home loans do not require mortgage insurance premiums
• The seller may pay ALL of the veteran's closing costs up to 4% of the selling price (and with a $0 down payment, the veteran can literally purchase a home for nothing) 

CONS:

• VA home loans require the veteran (or the seller) to pay a funding fee. If this fee is wrapped on top of the loan and the veteran finances 100% of the property, the veteran will be "upside down" on the home (meaning he or she owes more than the property is worth). Higher loan amounts reduce the available equity position of the veteran which could hamper selling the property within the first five years of ownership. In other words, if the veteran had to sell the home, there may not be a margin of equity to cover the closing costs on the sale of the property, any real estate commissions owed to a listing agent, and any other costs associated with the sale of a property. (This does not factor in any appreciation in the value of the home over this period of time)
• Co-borrowers are restricted to qualifying veterans and spouses of qualifying veterans only.
• The Department of Veteran Affairs will have access to your personal and financial records obtained during the loan process.

In the opinion of most people out there, the advantages definitely outweigh the disadvantages of choosing a VA home loan, especially when you can purchase a home for $0 down, have the seller pay for all of your closing costs, and move right in!

ARIZONA LOAN LIMITS The current limit in Maricopa County is $417,000

How to Buy a House with a VA Home Loan

Whether you are buying your first home or this is your fiftieth, the steps involved in purchasing a home with your VA benefits are the same. It is important to review the entire process before beginning. By doing so will only ensure a smooth and easy home buying transaction for you.

Steps involved in using your VA home loan benefits:

1. Determine if you are eligible for VA home loan benefits. This is a two part step that will begin the process. First, talk with a mortgage lender familiar with VA loans in order to see how large of a VA home loan you will qualify for. You should take into consideration not only the price range you desire but also the monthly payment you wish to have. 
2. Request your Certificate of Eligibility which will determine how much entitlement you have remaining. 
3. Find a real estate agent to assist you in buying a home.  Find an agent that you feel comfortable working with and an agent that believes he or she works for you (instead of the other way around). Remember, the seller can pay for all of your closing costs so be sure to find an agent that is savvy enough to negotiate this into the contract.
4. Once you have found a property and the seller has agreed to a sales contract, you will need to obtain full VA loan approval. This step may differ upon your choice of lenders but should consist of the following applying for the loan, determining the value of the property with a VA appraisal and Certificate of Reasonable Value, title search, and submission to an underwriter for approval 
5. Upon approval, you will go to the title/escrow company to close on the purchase of your home. This is the step where you will sign the mortgage/deed of trust, the note, and other pertinent closing documentation.
6. Upon closing, you should receive the keys to the home and the property legally becomes your own.

Though this is a simplified version of the process, it does outline several key points that you need to be aware of:

• Find out how much you qualify for before beginning the home search. In this step, you should also be able to identify any potential hurdles that would impede or prevent you from buying a home. ·
• Request your Certificate of Eligibility before beginning the home search process (this could take several weeks to receive and has the potential of delaying the process). ·
• Find an agent that knows how to negotiate! Too many veterans are buying homes for $0 down and NOT paying any closing costs because they have a competent real estate agent working for them. Don't be left out of the crowd.

Home Buyer Checklist

Whether buying your first home or your third, being prepared before buying a house is crucial to the home buying process. The Department of Housing and Urban Development (HUD) has created a "wish list" to assist you when beginning the home buying process.  "The homebuyers wishlist"

Once you begin narrowing down your selections, use HUD's home-shopping checklist to compare the homes on your list;  "The homebuyer's checklist"  Once you start looking at homes they all start to run together, so printing a few copies will help keep them straight.  

Find an Agent

Before beginning the home buying process, you must remember that as a potential home buyer you are the one in charge--not the real estate agent, not the lender, or the lawyer. More often than not, too many home buyers feel trapped due to a lack of knowledge of the process and rely on the judgment of others without knowing all of the facts and processes involved in home buying. This is especially true when selecting a real estate agent that will walk you through one of the most important transaction of your life. Savvy customers know that they have a right to interview agents to see how they will find and negotiate the sale of a home for them. With the variety of services that agents offer and the varying levels of education that agents can go through, the selection of agents can be immeasurable. As a buyer, it is important to first seek out the services of a buyers agent. This type of agent varies from other agents in the sense that they represent you in the real estate process, not the seller. Often times, a buyer will call the agent listed on a for sale sign outside a property only to find out that when it comes time to negotiating your interests, that agent represents the seller. Find out whom the agent represents. Even though most states require the agent to disclose this fact to the buyer. Be on the look out for agents that practice a form of buyer's representation called "dual agency". Dual agency is when the real estate agent represents both the buyer and the seller and forces the agent to be neutral throughout the negotiating process. Having someone looking our for your interests and offering their expert opinion about price and the condition of a home are invaluable when you consider you are spending anywhere from $100,000 to $200,000 and up. A buyer's agent is contracted by you to represent your interest in the real estate process and has a fiduciary responsibility to do so from the beginning of the home shopping process until the close of escrow. Most buyer's agents do not charge the buyer fees for their services. This is because their commission comes from the seller who has already agreed to pay the buyers agent anywhere from a flat fee up to 4% of the sales price. It is one of those strange but true paradoxes of real estate. Finally, remember that the decision is yours to make. Only you will have to live with that decision because once you have closed upon the home, you will have to live in it and only you will have to make the payments.

 Buying Considerations when using a VA Home Loans

More than 29 million veterans and service personnel are eligible for VA home loan financing. However, before the veteran begins the home buying process, there are several considerations that he or she should take into account:

• In most cases, the veteran can finance up to 100% of the sales price and no down payment is required
• The maximum loan amount may not exceed $417,000, the sales price, or the appraised value (as determined by a VA appraiser)...whichever is less.
• VA home loans do not require the veteran to pay monthly mortgage insurance 
• VA limits which closing costs the veteran is allowed to pay. 
• VA home loans are assumable, subject to VA approval. · Veterans have the right to prepay his or her VA home loan without penalty. 
• VA requires a funding fee that can range from 0.5% to 3.3% of the loan amount (excluding disable veterans). ·
• Veterans may be eligible for second or subsequent use of the VA home loan benefits. You may want to review other considerations.

VA Home Loans and Selling Considerations

Whether selling your home by owner or using the services of a real estate agent, you, the seller, may be presented with an offer from a buyer who has been approved for a VA home loan. Your decision to accept that offer may have an impact upon the net profit from your home. It is important that before you begin the home selling process, you consider all the factors that may impact the profits from the sale of your home. In this section, we are going to look at two of these considerations you need to contemplate before selling your home: VA requirements of sellers and VA closing costs.

When it comes to selling a home and the VA buyer, there are usually two steps in the home selling process that most sellers do not consider.

First, VA will require to pay all non-allowable closing costs.

Second, VA requires a termite inspection to be completed on the home prior to closing. If there is a wood infestation, that additional cost falls upon the shoulders of the seller.

Sellers want to know how a VA home loan will impact the net proceeds of the sale of their home. If the buyer plans on purchasing the home with a VA loan, you will have additional costs that are not normally considered "seller's closing costs". Generally speaking, these costs will not have a major impact upon your bottom line, but it is important to have the buyer's lender give you these costs before signing the contract. Not doing so could result in a rude awakening when you close on the property and you will realize that all of your supposed profits went towards helping the buyer get into your home.

However, it is important to also mention that if you do have a VA buyer, you are allowed to pay all of the buyer's closing costs as well up to 4% of the selling price. This may be an attractive enticement for potential buyers if they know they can buy your home with no out of pocket expenses (VA loans require $0 down).

VA Non Allowable Closing Costs paid by the seller

Mandatory Attorney's fees other than for title committments	Brokerage fee to real estate agents
Pre Payment penalties for existing leins	Lender's appraisals
Lender's Inspections unless new construction or on the appraisal	Loan closing or settlement fees
Doc Prep, underwriting, loan application, processing or admin fees	Assignment fees
Interest Rate lock in fees	Photographs
email, fax, copying, postage, stationary, telephone or other overhead	Notary fees
Amortization Schedule or truth in lending fees	Escrow fees and charges
Committment fees or marketing fees	Trustee Fees
Termite inspection fee	Tax Service Fee

 VA generally requires a termite inspection on all of their properties they insure. If you suspect termites, it might be beneficial to have a termite inspection done on the home prior to selling it and if any infestation is found, fix it (this becomes a fact that you will have to disclose to the buyer before purchase anyway, so you might as well get it out of the way).

Finally, before putting your home on the market, make sure that all of the necessary "major" repairs have been completed on the home. Go through the home and have the air conditioning serviced or faulty light switches replaced. If you don't feel qualified to do so, hire a local home inspection company to inspect your property in order to find any faults or defects with the home. If you hire a contractor to complete the repairs on the home, it is best that you bid out the repairs and do not use the same company that conducted the home inspection. Often times the home owner will be charged for needless and non-existent problems of the home.

VA Home Loan Assumptions

As a seller that has an existing VA home loan on your property, you may wonder about the feasibility and possibility of having a buyer purchase the home and assume the current VA home loan. Before you rush out and sign a contract, there are several considerations that you need to take into account. You may sell the property to a veteran or a non-veteran at any time.

However, if the VA home loan was closed after March 1, 1988, and it will be assumed by the buyer, the qualifications of the assumer must be reviewed and approved by the lender or VA. Prior to March 1, 1988, VA home loans could be assumed by anyone. With newer VA loans, the buyer generally has to be a qualifying veteran in order to assume the mortgage.

You should contact your current lender for more information on the requirements on assuming your current VA home loan. It is important to mention that just because someone assumes your VA home loan, you are not necessarily off of the hook. If the loan was closed after March 1, 1988, the lender or VA must be notified and requested to approve the assumer and grant the veteran release from liability. If the loan was closed prior to March 1, 1988, the loan may be assumed without approval from VA or the lender.

However, the veteran is strongly encouraged to request a release of liability from VA in order to avoid owing a debt to the Government if the loan assumer (or a subsequent assumer) fails to pay the loan. However, a release of liability does not necessarily restore your entitlement. The assumer must not only qualify from a credit and income standpoint, but he or she must have sufficient entitlement AND agree to substitute it for that used by the original veteran in obtaining the loan and meet occupancy requirements, It is not recommended to allow a non-qualifying buyer to "assume" your mortgage by making the payments for you. In this type of transaction, the buyer pays the seller the difference between the sales price and the remaining mortgage (also known as the Cash-to-Mortgage) and pays the title/escrow company which in turn pays the lender for the seller. Though many sellers are duped into believing that they are released from any potential liability, the reality is they are putting their credit history in the control of someone who does not qualify for a loan AND gives title of the property over to this person thus putting themselves into a position of maximum risk with no collateral should the buyer default on payments.

In the end, you could be the one that owes the government for a loss, have your credit history destroyed by someone else, possibly be sued for liability while the buyer only looses his or her initial down payment to you.

VA Interest Rate Reduction Refinance Loans

A VA Interest Reduction Refinance Loan (also know as a VA IRRRL) is a streamline refinance which that requires little documentation, no appraisal, and a reduction in the interest rate on the VA home loan. VA interest rate reduction refinances do not require credit underwriting and the mortgage loan must be current.

The following are basic requirements of a VA interest rate reduction refinance:

• The mortgage to be refinanced must already be a VA home loan
• The borrower must have been making the mortgage payments on time
• The refinance must lower the interest rate as compared to the previous VA home loan
• The borrower may not receive cash from loan proceeds
• Any subordinate financing may remain in place as long as it is subordinated on title
• The borrower must have owned the property and had the VA mortgage for at least six months to be eligible (does not need to be owner occupied)
• The term of the new mortgage cannot be any greater than the term of the existing VA home loan plus 10 years and not to exceed 30 years plus 32 days.
• An appraisal is not required unless the closing costs are wrapped into the loan. IRRRL refinances are limited to the balance owing on the current VA home loan, closing costs and funding fee (0.5%).
• No termite report is required 
• The borrower cannot be late, delinquent, or in default of any federal debt.
• The borrower cannot receive any cash back from the transaction.
• If the veteran whose entitlement was used to obtain the existing VA loan has died, regardless of the cause of death, and the veteran's surviving spouse was a co-obligor, the surviving spouse is considered a veteran for the purpose of refinancing under this program. The surviving spouse must own the property to be refinanced.
• All parties on the original loan must be on the new VA home loan

VA Cash Out Refinance Loans

Cash-out refinances on properties owned more than one year prior to the refinance are permitted on owner occupied principal residences only, and are limited to 90% of the appraised value plus the allowable closing costs.

A cash-out refinance is when a borrower refinances their current mortgage for more than they owe in order to pull out the built up equity that has accrued in the home. The amount a home owner can borrower is limited by the value of the property compared to the loan amount (otherwise known as the loan-to-value or LTV). The following are basic requirements of a cash-out VA refinance loan:

If the property was purchased less than one year preceding the refinance, the borrower is allowed to refinance up to 90% of the original sales price plus the allowable new closing costs or the appraised value plus the allowable closing costs (whichever is lesser) * If the property was purchased more than one year preceding the refinance, the borrower can cash-out 90% of the the appraised value plus the allowable closing costs

• Applies to owner occupied properties only
• 2nd mortgages may be paid off with the cash-out refinance (the second mortgage must be at least 12 months old)
• Loan amounts may not exceed 90% of the appraised value or $417,000 whichever is less
• The borrower must have sufficient entitlement for the loan (not including any existing entitlement that was used for loans to be paid off by the refinance
• There must be a first lien against the property.
• If the new loan is to refinance an existing mortgage to buy out an ex-spouse's equity, a divorce decree or settlement agreement must be provided to document the equity awarded to the ex-spouse
•  All borrowers must credit qualify
• A funding fee of 3.00% will be added to the loan amount at time of closing (there are no refunds for previous funding fees assessed by the VA). 
• Borrower may receive cash proceeds at closing 
• Maximum loan term is 30 years plus 32 days

VA ENERGY EFFICIENT MORTGAGES

On a VA Energy Efficient Mortgage the maximum loan amount is the lower of the appraised value or purchase price minus the down payment, if any. You then add in the cost of the Energy Improvements based on the HERS report plus the funding fee. Your base mortgage amount may be increased by:

less than or equal to $3,000 with the copy of the bids / contract itemizing the improvements and their costs.

greater than $3,000 to $6,000 – same documentation as above with determination that monthly mortgage payment increase does not exceed the reduction in monthly utility costs. Documented determination made by municipalities, utility companies, state agencies or other reliable sources.

Greater than $6,000 – Discretion must be exercised. Including the above requirements consider whether veteran’s income will cover the higher monthly payment. Subject to value determination by VA.

The Funding Fee will be calculated based on the costs of the Energy Efficient Improvements and the full loan amount. Entitlement and Guaranty: Entitlement used will be based on the loan amount before adding the cost of Energy Efficient Improvements. The 25% required guarantee will be based on the total loan amount including improvements.

If the improvements are not completed prior to closing….an escrow account may be set up and the loan closed. The following will apply:

• Only the amount needed to complete the improvements may be withheld.
• Check the appropriate block on VA Form-26-1820. Item 23. Report and Certification of Loan Disbursement
• Improvements should be completed within (6) six months form loan closing VA Home Loans

Common Forms Used by the Department of Veterans Affairs 

You can download the following forms from the Department of Veteran Affairs by using the links listed below.

• VA and VA Related Forms:VA Form 26-1880
• Request for Certificate of Eligibility VA Form 26-8937
• Verification of VA Benefit-Related Indebtedness
• SF 180 Request Pertaining to Military Records (the above is a link to the National Personnel Records Center and is the form you need to request a copy of your DD214 / Discharge paperwork)

 Credit Guidelines for VA Home Loans

VA requires a borrower to demonstrate a good to excellent repayment history of all debts. This history serves as the most useful guide in determining a borrower's willingness to repay credit obligations and serves as a model in predicting his/her future actions. A borrower who has made payments on previous or current credit obligations (such as a credit card, student loan, etc.) in a timely manner represent a reduced risk to VA.

Conversely, if the credit history, despite sufficient income to support these debts, continuously reflects slow or often late payments, judgments and delinquent credit accounts, strong offsetting factors will be necessary to approve the loan. When analyzing a borrower's credit report, it is important to focus upon the general pattern of credit behavior rather than isolated occurrences of late payments.

Often times, people will experience a period of financial difficulty in the past and does not necessarily translate into an unacceptable risk. Reasonable explanations of the credit derogatory and evidence of offsetting factors (such as a new job or promotion with greater stability and pay, for example) will be necessary. All derogatory credit information must be explained, in writing, by the borrower.

The Following is a brief synopsis of the credit underwriting guidelines for VA home loans

Lack of credit history: If a borrower does not have a minimum of 2 trade lines on their credit report, alternative forms of credit may be used. This would include items such as auto insurance payment history, utility bills, etc. · Included credit obligations: Any installment loan (e.g. student loans, car loans, etc.) with less than 10 months remaining does not need to be included when qualifying for a VA home loan. However, consideration is given to a large debt of over $100 a month, regardless of the number of months remaining.

Furthermore, payments on auto leases with less than 10 months must be included in the qualifying ratios. The minimum payment on all revolving accounts (i.e. credit cards) is also factored in. If the borrower has an open revolving account without a balance, $10 per open account should be included when qualifying. Any loan where the borrower has co-signed for another party is included with their debts unless the borrower can prove that the the other party has made the payments on their own for a minimum of 12 months

Chapter 7 Bankruptcy: VA requires a minimum of 2 years since the discharge of the bankruptcy. An explanation of the bankruptcy will be required. Furthermore, the borrower should have re-established credit (i.e. secured credit card) with no late payments. 

Chapter 13 Bankruptcy: VA will consider a borrower still paying on a Chapter 13 bankruptcy if the payments to the court have been made for a minimum of 1 year in a satisfactory manner (as verified with the courts) and with the approval of the court trustee

Federal Debts: A borrower is not eligible for a VA loan if he/she is delinquent or in default on any federal debt (such as a HUD or VA mortgage, student loans, SBA loans or a tax lien against his/her property). Borrowers can become eligible by bringing any delinquent accounts current, making satisfactory repayment arrangements with the creditor (generally a 3 month history will be required), or paying the account in full. ·

Judgments: Judgments must be paid in full prior to closing. · Collection Accounts If a collection account is minor in nature ($100 or less), it generally does not have to be paid off as a condition of loan approval. This may vary from region to region.

Foreclosure: A borrower who has had a property foreclosed upon, or who has given a deed-in-lieu of foreclosure within the previous 3 years, is generally not eligible for a VA home loan. However, if it was the result of extenuating circumstances beyond the borrower's control (such as the death of a spouse, loss of employment, or serious long-term illness, etc.) and the borrower has since re-established good credit, an exception may be granted. However, extenuating circumstances do not include the inability to sell a house when transferring from one area to another. If the foreclosure was on a VA guaranteed property using the borrower's entitlement, VA may limit the maximum amount loaned to the borrower.

SHORT SALES- The VA does not consider a short sale as a pre-foreclosure. Generally, you need one year from a short sale. VA considers on a "case by case" basis.

To see if you qualify, please call 602 993-0000 or email sunnations@cox.net

Income Guidelines for a VA Home Loan

VA requires a borrower to have sufficient and adequate income to cover the repayment of the mortgage. Before a borrower can be approved for a VA home loan, the stability of income and the continuance of the borrower's income must be established through acceptable sources of income, the borrower's past employment record, and the employer's confirmation of continued employment must be established.

Stability of a person's income is generally derived from their employment history. VA requires verification for the previous two full years and must be documented through lender verifications of previous employment or W-2's. This income must be analyzed to determine whether it can be expected to continue through the first 3 years of the mortgage loan (if the borrower intends to retire during this period, the expected retirement income, social security benefits, etc. should be used). Any gaps in employment must be reasonably explained by the borrower. Schooling or education for the borrower's profession (e.g. nursing school) can be counted towards the 2 year requirement. Allowances for seasonal employment, such as is typical in the building trades for example, may be used.

The following is a break down of the different types of income VA considers acceptable: 

• Salary / W-2 Income 
• Overtime or Bonus Income: Both may be used to qualify the borrower as long as the income has been received for the past two years and is likely to continue. An average of the bonus or overtime income over the last 2 years is used
• Part-time income (second job) may be used in qualifying if the borrower has a 2 year employment history without interruption.
• Seasonal employment may be used if the borrower can demonstrate a 2 year history and the probability of continuation.
• Income from part-time positions that does not meet these requirements should be considered as a compensating factor only
• Commission income must be averaged over the previous 2 years. The borrower must provide his/her last 2 years Federal tax returns (1040's) with all schedules. Any un-reimbursed business expenses must be subtracted from the gross income.
• Retirement / Social Security Income: Verification from the source is required. If the income should expire within 3 years, the income cannot be used to qualify the borrower and used only as a compensating factor ·
• Alimony, Child Support, or Separate Maintenance: Though not required for qualification, a borrower who chooses to use this income must 1) provide a 12 month payment history from the ex-spouse or courts showing timely payment and 2) provide evidence that such payment will continue for at least 3 years. A copy of the divorce decree, settlement agreement, etc. will be necessary.
• Notes Receivable: A copy of the note and evidence that payments have been received for a minimum of 12 months are required. Should the note expire within 3 years, it can be used as a compensating factor only. ·
• Interest and dividend income may be used provided documentation (such as tax returns or account statements) supports a 2 year history of receipt. This does not include dividend re-investment plans.
• Rental Income: Rent received from investment properties owned by the borrower may be used, subject to the proper documentation. Income from roommates, etc., in a single-family property to be occupied as the borrower's primary residence is not acceptable. Rental income is calculated by calculating 75% of the gross rents received minus any mortgage payments paid for the property (this may have a positive or a negative effect on a person's income).
• Self-Employed: A borrower with 25% or more ownership interest in a business is considered self-employed. The income from borrower's self-employed less than one year is not acceptable. Borrower must supply the following: 1) personal tax returns for the most recent 2 years (with all schedules), 2) K-1's, 1120's or 1120S's for the last 2 years, financial statements (profit and loss statement and a balance sheet) for the interim and last 2 years, 3) borrower will have to sign an 8821 or 4506 income taxes release form (see lender).

Compensating Factors for VA Home Loans

When a borrower's payment or combined monthly debt payments is/are higher than the limits prescribe by VA, the loan may be approved with compensating factors.

The following are several compensating factors to support borderline loan files:

• Energy efficient dwelling 
• Less than 10% increase from old rent/house payment to the new housing expense
• A borrower's excellent savings ability (as shown by savings accounts, IRA's, etc.)
• 3 or months cash reserves (house payments after closing) that are not part of a gift
• Limited use of credit
• Borrower has potential for increased earnings
• Borrower has income that cannot be used as qualifying income
• Larger than minimum down payment
• Showing the effect of the tax savings from homeownership or tax credits for child care.
• 20% or more residual income over the set requirements by VA
• Good credit and steady income are not compensating factors.

VA Closing Costs

Closing costs that may be charged to the buyer are considered "allowable" closing costs per VA. These are buyer costs that are reasonable and customary as determined by VA.

All other costs are considered non-allowable are are generally paid by the seller when purchasing a home or the lender when refinancing your current VA mortgage.

The following tables gives a break down of these costs:

Allowable

• Appraisal Fee (if customary)
• Credit Report Fee
• Endorsement Fee (related to title insurance only)
• Home Inspection Fee
• Notary Fee
• Origination Fee (max 1% of loan)
• Discount Points
• Recording Fee
• Title Insurance / Title Search fees
• Funding Fee
• Survey Flood Zone Determination
• Prepaid Items such as property taxes and hazard insurance
• Bring-down Fee

Non Allowable

• Loan Application Fee
• Processing Fee
• Lender's Administrative Fee
• Document Preparation Fee (unless the documents were prepared by a company other than the lender) Documentary Transfer Stamp
• Tax Attorney's Services (other than title work)
• Interest Rate Lock-in Fee
• Postage/Delivery Fee
• Loan Tie-in Fee Photo Fee
• Notary Fee Tax Service Fee
• Underwriting Fee
• Escrow Fee
• Buyers Broker Fee

The aforementioned list of VA closing costs is not an all-inclusive list.

If you have questions, please refer to your local VA office for clarification. Closing costs cannot be included in the loan amount (except for a refinance). The seller can pay for all of the buyer's closing costs (up to 4% of the sales price).

Funds to Close for VA Home Loans

The borrower's cash investment in the property must equal the difference between the amount of the VA mortgage, excluding the funding fee, and the total cost to acquire the property (to include prepaid expenses, closing costs, etc.)

All funds must be verified from acceptable sources. Acceptable sources of these funds include: 

• Earnest Money Deposit: If the amount of the earnest money deposit exceeds 2% of the sales price or appears excessive based on the borrower's history of accumulating savings, the deposit amount and source of funds must be verified. Otherwise, satisfactory documentation includes a copy of the borrower's canceled check or verification from the bank.
• Savings and Checking Accounts: The lender must verify these accounts. The borrower will need to provide the last three most recent bank statements. If a large increase in deposits is present or the account was recently opened, an explanation and verification of the source of the deposit must be established. Non-sufficient funds, bounced checks, or account overdrafts will need to be reasonably explained.
• Gift Funds: An outright gift is acceptable if it is from: 1) a relative of the borrower, 2) the borrower's employer or labor union, 3) a charitable organization, or 4) a governmental agency or public entity that has a program established to provide homeownership assistance to low and moderate income families. No repayment of the gift may be expected or implied. Furthermore, a gift letter signed by both the donor and the borrower stating the amount of the gift and that repayment is not required, provides the donor's name, address, phone number, and relationship to the borrower will be required. In addition, verification of the transfer of funds from the donor's account to the borrower's account, via copies of the donor's canceled check, for example, and the borrower's deposit slip or bank statement will be necessary. 
• Sales Proceeds: Sale of an asset is considered an acceptable source of income if the borrower provides: 1) copy of the bill of sale or HUD-1 Settlement Statement (for the sale of a home), 2) copy of the check or verification of funds transfer from the buyer of the asset to the borrower, and 3) copy of the borrower's deposit slip or bank statement showing the deposit of the funds into the borrower's bank account. 
• Rent Credit: If the portion of a borrower's current rental payment is to be used to purchase the property the borrower currently occupies, the borrower will need to provide a copy of the rental/lease agreement showing an option to purchase with the clause stating how much of the rental payment is to be used as a rent credit. If the net rent to the seller is below current market rents, the rent credit may not be acceptable.

Necessary Documentation for VA Home Loans

Depending on your situation, you will be asked for documentation to support your income, liabilities, and funds to close. This documentation will establish your credibility as a borrower, your ability to repay the VA home loan and your willingness to repay the loan.

The following is a list of documents that will be required by the lender to process your VA mortgage as required by VA:

One full month's worth of pay stubs

Last 2 years W-2's (salaried income) and / or last 2 years tax returns with all schedules (commission, dividend, rental income or self-employed borrowers)

• Copy of your DD214 · Copy of your Certificate of Eligibility (if applicable)
• Copies of social security, pension, and/or retirement award letters (if applicable) 
• Last two months bank statement for all accounts 
• Current statements for all investment accounts 
• Documentation to support funds to close 
• Explanation for any credit derogatories
• Bankruptcy and discharge paperwork (if applicable)
• Divorce decree and any settlement paperwork (if applicable)

VA Home Loan Funding Fee

In order for VA to guarantee the home loan, there is a closing cost assessed by the VA to originate the loan called a funding fee. This fee will vary, depending upon the type of VA loan, whether this is your first time to use your entitlement, if you are a disabled veteran, the down payment and if you served active duty or in the National Guard/Reserves. 

VA Funding Fees for Purchase Loans

Type of Veteran	Down Payment	% for First Time Use	% for Subsequent Use
Regular Military	None 5% to 10% 10% or more	2.15% 1.50% 1.25%	3.30% 1.50% 1.25%
Reserves/National Guard	None 5% to 10% 10% or more	2.40% 1.75% 1.50%	3.30% 1.75% 1.5%

 

Cash Out Refinance

Type of Veteran	% for First Time Use	% for Subsequent Use
Regular Military	2.15%	3.30%*
Reserves/National Guard	2.40%	3.30%*

*The higher subsequent use fee does not apply to these types of loans if the veteran's only prior use of entitlement was for a manufactured home loan.

Type of Loan	% (does not matter if first time use or subsequent use)
IRRRL's	.50%
Loan Assumptions	.50%

The funding fee does not have to be paid by veterans receiving VA compensation for service-connected disabilities, or who but for the receipt of retirement pay would be entitled to receive compensation for service-connected disabilities, or surviving spouses of veterans who died in service or from a service-connected disability