Tag: va loan guidelines

VA Loans for Reservists and National Guard

As a Reservist or member of the National Guard, did you know that you could be eligible for a no down payment VA Loan? If you’re thinking about refinancing or buying a house, maybe you didn’t even realize the VA Loan could be an option for you. Although your role is different than that of a regular military member, you are still eligible to receive VA Loan benefits, with a few different qualifications. Here’s what you need to know.

VA Loan Requirements

The VA Loan was created to help veterans purchase homes, and the U.S. government provides a loan guaranty on it. It is a zero down-payment home loan with more flexibility and lower payments than conventional loans, which require 20% down. The VA Loan is only available to U.S. veterans and current military members — and that includes Reservists and National Guard.

VA Loan requirements for Reservists and National Guard are a bit stricter than those for regular military members. To be eligible for a VA Loan, you have to meet at least one of the following qualifications:

  • Six years in the Selective Reserve or National Guard, and you must have either been honorably discharged, retired, or transferred to the Standby Reserve or an element of the Ready Reserve
  • 90 days of active duty service during a wartime period
  • Discharged or released from active duty service for a service-related disability

VA Funding Fee

When you take out a VA Loan, you will have to pay a funding fee, which goes to the VA to help offset the cost of any loans that end up in default. If you have a service-related disability and are currently receiving disability compensation or are entitled to it, you would not have to pay the funding fee.

Related: Use our VA Loan Calculator to estimate total mortgage payments and VA guaranty fees!

The difference for Reservists and National Guard members is that the funding fee is slightly higher than it is for regular military members. If you take out a VA Loan with zero down, as a regular military member, you’d have to pay 2.15 percent for the first loan and 3.3 percent for any subsequent loans. As a Reservist or National Guard member, your funding fee would be 2.4 percent for the first loan and 3.3 percent for any subsequent loans.

If you have a 5-10 percent down payment, as a regular military member, you’d pay 1.5 percent funding fee for the first and any subsequent loan. With a 10-20 percent down payment, you’d have to pay a 1.25 percent funding fee for the first and any subsequent loan.

With a 5-10 percent down payment, as a Reservist or National Guard member, your funding fee would be 1.75 percent for the first and any subsequent loan. With a 10-20 percent down payment, your funding fee would be 1.5 percent for the first and any subsequent loan.

We, at Riverbank Finance, are grateful for our service members and would like to help you own the home of your dreams or refinance on your current home. To find out whether you are eligible for a VA Loan, contact one of our loan officers at (800) 555-2098 to schedule an appointment.

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Can you have more than one VA Loan?

If you have a Veterans Affairs (VA) Loan on your first home and are thinking about buying a second property, you can get more than one VA Loan without having to sell or refinance your current home. This is called VA Loan second-tier entitlement. The higher tier entitlement kicks in for purchases over $144,000 per VA guidelines.

The federal government has provided veterans and military personnel with the VA Loan so they can come back to the United States and purchase a home with no down payment. That’s much better than having to come up with a 20% down payment for a conventional loan on a second home, so you should take advantage. If you are considering getting two VA Loans, here’s how it works:

VA Loans Second Tier Entitlement

Michigan has a county loan limit of $453,100 for VA Loans. The VA provides borrowers with a 25% guaranty on their loan, which, in Michigan’s case, would be a maximum of $113,275. If you already have a VA Loan on your first house, the guaranty provided to you would be subtracted from the maximum amount.

VA Entitlement Calculation Example

Let’s say you bought a $200,000 primary home with a VA Loan and you want to buy a second home in Michigan with a VA Loan. Let’s figure out the math on this.

$424,100 X 25% = $113,275 maximum guaranty

$200,000 X 25% = $50,000 guaranty and down payment required

$113,275 – $50,000 = $63,275 maximum guaranty allowed on second home

$63,275 x 4 = $253,100 maximum price of second house

Maximum VA Loan Amount Calculation

Basically, if you bought a $200,000 home in the state of Michigan using a VA Loan, the VA would have guaranteed $50,000 toward your down payment. If you want to buy a second home in Michigan with a VA Loan, you can buy one that is a maximum of $253,100 with no down payment. If your second home costs more than that, you will have to add some money for the down payment.

Let’s say the second home you’re considering is $300,000. The 25% entitlement on that house would be $75,000, putting you $11,725 above the $63,275 maximum guaranty. That means you would have to add a down payment of $11,725 to be able to purchase the second home for $300,000 with a VA Loan.

Related: Try our VA Mortgage Calculator to estimate mortgage payments for your VA Mortgage.

Benefits to getting two VA Loans

If you are relocating or just want to buy a new home, a second VA loan may be the best solution. Here are the benefits of getting your second VA Loan versus Conventional financing:

  • Do not need to sell your current home that has a VA Loan
  • Do not need to refinance your VA Loan into a Conventional Mortgage to qualify
  • You may be able to rent your current home and offset the mortgage with rental income
  • You will save on home sales fees
  • You will save on mortgage refinance costs
  • You may still qualify for Zero Down Financing

Buying a Second Home with a VA Loan

VA Loans are typically more lenient than other types of loans. If your first home was foreclosed, you can still get a VA Loan on your second home. Riverbank Finance can help you find out how much of the VA’s 25% entitlement you still have left to use.

If you are planning on buying a second home using VA financing to use as your primary residence we would be glad to assist you. You may be eligible for a second VA loan for your purchase and not be required to sell your current home. For more information, call Riverbank Finance at 800-555-2098 to set up an appointment with one of our loan officers.

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VA loan income guidelines for buying a home with VA financing.When apply for a VA mortgage loan it is important to know the income guidelines to qualify for your home purchase. Most people already know the basics about no-down payment mortgage programs including the VA home loan, however it is important to understand how your income will be qualified as a military veteran.

VA loan income guidelines are similar to conventional mortgages and FHA loans however they add in one uncommon element called residual income. The residual income guideline can be a blessing and a curse for mortgage approval. Keep reading for details on how VA loan income is calculated.

VA Loan Income Qualification Example

The debt to income ratio (DTI) is calculated by dividing the monthly debt obligation by the gross monthly income. For example, we would start with calculating a borrower’s total Gross income (before taxes). A $24,000 per year salary divided by 12 months equals $2000 per month gross income (before taxes).

Next we would calculate the borrowers total debt obligations by adding their current monthly expenses. These expenses are those that report to the credit bureaus such as car loans, student loans, personal loans, credit cards and other mortgage payments. Let’s say for example these items total $200 per month. This is called the front end ratio.

Finally we add the expense of the new home being purchased to calculate the back end ratio or total debt to income (DTI). To be within the DTI guidelines for VA loans of 41%, the borrower could afford a house payment of $620/month including property taxes and home owners insurance. Here is the math:

  1. $24,000 Annual Income / 12 months = $2,000 Gross Monthly Income
  2. Total all currently monthly obligations to get the front end ratio ($200 for example)
  3. Calculate the total allowed housing expense ($2,000 x 41% = $820 total allow expenses)
  4. Subtract the current debts to find the total allowed housing expense ($820 – $200 = $620 per month allowed VA loan payment)

VA Loan Residual Income

When applying for a VA loan you will be asked several questions about all of your expenses including food, utilities and other loan payments. This is due to the fact the your loan officer is trying to help calculate your residual income which is the money left over after all bills are paid.  The residual income is unique to VA loan which may be part of the reason why VA loan preform so well with on time payments even compared with conventional mortgages and A-Paper mortgage programs. The residual income guidelines require different minimum amounts for different regions of the United States. The borrower must meet the minimum requirement for money left over after all expenses or the loan will not be approved.  Additionally the residual income guideline may help be a blessing as some lenders allow the standard DTI to be ignored if the residual income is at least 120% of the areas minimum residual income requirement.

Apply For A VA Loan

While VA loan rates remain low, it may be the perfect time to apply for a VA loan. If you’re a veteran or active member of the military, see what VA loans can do for you by calling the friendly, experts at Riverbank Finance today!

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**NOTE: Riverbank Finance LLC is not a government organization nor affiliated with the Department of Veterans Affairs however they offer VA loan financing guaranteed through the Veterans Administration for current and prior military veterans.