Military VA Home Loan Advice! OPEN EARS :)

[Gloria Zepeda]

Hey there!!! :) Hoping for some advice. Military veteran, both my husband and I, and want to use VA home loan. Currently, I am a full-time Pharmacy Student, with only a 1.5 years left until graduation and my husband drives a truck full time. Currently have NO credit card, school, loans or car debt (will graduate debt-free) OORAH! Have no debt at all. Have about 20K in savings. My credit score 760 and husbands 630. Would love to purchase up to a 4-plex. Live in Oregon. Is this possible with our current situation or do we wait? ANY advice is appreciated! I am OPEN EARS! THANK YOU!!!

[Jason Bohling]

Quote from @Gloria Zepeda:

Hey there!!! :) Hoping for some advice. Military veteran, both my husband and I, and want to use VA home loan. Currently, I am a full-time Pharmacy Student, with only a 1.5 years left until graduation and my husband drives a truck full time. Currently have NO credit card, school, loans or car debt (will graduate debt-free) OORAH! Have no debt at all. Have about 20K in savings. My credit score 760 and husbands 630. Would love to purchase up to a 4-plex. Live in Oregon. Is this possible with our current situation or do we wait? ANY advice is appreciated! I am OPEN EARS! THANK YOU!!!

You're actually in very good shape. I'm a veteran myself, and have used my VA loan 4 times over the years, so not an expert but have a good amount of experience with it. There's a couple things to keep in mind about the VA loan as you use it.

First, the program was designed specifically to foster home ownership for active duty/Guard/Reserve/veterans, not to purchase rental properties, so you can't use it to say, purchase a 4-plex in Atlanta, GA while you live in Portland, OR, you would have to move to Atlanta, GA and live in it.  However, you can use it to purchase a primary residence, live in a unit (since you mentioned a 4-plex) and then move out and turn the 4th unit into a rental.  There is a required intent to live in it for a year, however, if life circumstances force you to move early that's ok, otherwise every time someone active duty uses it and then gets orders 2 months later (saw this happen a lot) they'd get penalized.  Regardless, I would do whatever you can to fulfill the requirements honestly, cause 1. its the right thing to do and, 2. mortgage fraud is no joke.  The rules for the program are the same for active duty/Guard/Reserve/veterans, whether in uniform or after service.

You have a set amount of entitlement you can use, meaning, based on the number of units (SFR vs duplex vs triplex vs quadplex) and county (some counties are more expensive than others, so you'll need to look up the specific county as the amount can vary) in which the property is located. What this does is it guarantees the mortgage up to a certain dollar amount, enabling you to purchase with 0% down and no PMI. Now, you can use your VA loan to purchase a property more expensive than this amount, but what will happen is you will need to make a down payment of 25% of the excess between the VA loan limit and the purchase amount, i.e. if the loan limit is $540,000 and the purchase price is $600,000, you will need to make a down payment of $15,000 ($60,000 excess x 25%=$15,000), BUT there will still be no PMI, which can greatly help.  If it's $540,000 or under in this scenario, you'll have no PMI and can do 0% down.

Once you've used up your entitlement, in order to use it again you have 2 options. To reinstate it you either have to 1) "dispose" of the property, in which you either sell the property or you pay it off. Or, 2) you can do what I just did, myself and refinance the property which is in a VA loan into a conventional 30-year mortgage (or whatever works for you, the point being it moves out of being a VA loan) and as a ONE-TIME thing, you can request to have your entitlement restored, freeing it up to be used again while keeping the owned property as a rental. This was actually a very simple and quick process, (I'm aware I just called a VA process quick..it was weird).

Whenever you use the VA loan there is a funding fee, which can vary from, I believe, 0.5%-3.6% of the loan amount (check with your lender on this to be safe, I want you to have the right information). This is what pays for the program, however, if you're like me and most other veterans and picked up some injuries during your service and have a service-connection rating from the VA, this funding fee is waived every time you use the VA loan.  If not, the funding fee, I believe, can be wrapped into the loan.

Because of the limitations on using the VA loan, if I was you, I would use 1 of your VA loans (either yours or your husbands) to purchase a property now, but not use the 2nd and save it for when you guys reach the point of purchasing your forever home. Also, with the VA loan, credit score doesn't really matter in my experience as every lender I have worked with has looked at it as either you qualify or you don't, i.e. you're not going to get a better rate if your averaged scores are 800 vs 720 vs 690. Most lenders want to see a score above 620. Again, check with your lender. Thank you for the service to our country by both you and your husband and the sacrifices I know you both made along the way. If there's anything else I can help you with, let me know and good luck to you both!!!