There Are Benefits To Second Tier Entitlement In Higher Cost Area's!

There is a great explanation below by VA,  of how second tier entitlement is calculated and how purchasing a home in a higher cost area, may actually benefit you if you can find the right priced home. The calculations are done based on the maximum county loan limit, so increasing the county loan limit may open up a greater opportunity. There is still other criteria that must be met and you still would need to be approved, but it can open up opportunities, that may have not been there, if you obtained your first loan where there was a lower loan limit. 

Explanation of Entitlement and Second Tier Entitlement

Purchasing With A VA Loan Criteria

Service Requirements For Eligibility

Obtaining A Certificate of Eligibility

Explanation of Entitlement and Second Tier Entitlement

VA Loan Limits are the same as Conforming Loan Limits for 2016

ELIGIBLE PROPERTY TYPES

1 – 4-unit properties

Condominiums—per VA guidelines and must be on VA approved list.

INCOME

• In order to be considered for approval of a VA home loan, income stability is a mandatory requirement
• Veterans recently separated from the service must have a minimum 2 year work history in the same line of work that he/she did in the service. The veteran should be in his/her most recent job for at least 12 months.
• Rental Income *** Rental income verified as stable and reliable may be included in effective income. Must have prior experience managing rental units or other background involving both property maintenance and rental.
• Rental Income *** Multi Unit Property Securing the VA Loan (2-4 units) cash reserves totaling at least 6 months PITI
• 75% of verified Rental history, or the appraisers opinion of market rent
• Rental Income*** Property the applicant occupied prior to the new VA Loan, use the prospective rental income to offset the mortgage payment only It may only be used to offset the mortgage payment on the departed residence.
• If no rental income is needed to support PITI - no cash reserves needed!

MAXIMUM FINANCED PROPERTIES

The maximum number of financed properties that the borrower can have is 4. However, the borrower must still have remaining VA eligibility for a VA loan.

GIFTS

A gift letter, source of funds and evidence of transfer of gift funds is required.

MAXIMUM LTV

100% for Purchase transactions
100% for Refinance transactions
100% for IRRRL Refinance transactions

MAXIMUM LOAN AMOUNTS, MINIMUM FICO SCORE AND RESERVE REQUIREMENTS

• Base Loan Amount - Up to the applicable county loan limit for the subject property - including high cost counties

Minimum FICO - 600

Required Reserves - none

• If Base Loan Amount - Above County Loan Limit - $750,000

Minimum FICO - 640

Required Reserves - 2 Months PITI

• If Base Loan Amount - $750,001 - $1,000,000

Minimum FICO - 680

Required Reserves - 4 Months PITI

• If Base Loan Amount - $1,000,001 - $1,200,000

Minimum FICO - 720

Required Reserves - 6 Months PITI

OCCUPANCY

Owner-occupied, primary residences are allowed. Second homes or investment properties are not allowed.

RESERVE REQUIREMENTS
RESERVES – must be liquid, readily accessible funds (non - retirement ) Cash reserves are required under the following circumstances:

1. • If the borrower uses rental income to qualify and the subject property is 2-4 units, six (6) months cash reserves
   • If the borrower uses rental income from other rental property(s), three (3) months cash reserves must be documented.
   • Please refer to “Maximum Loan Amounts, Minimum FICO, and Reserve Requirements” section for any additional restrictions due to loan size.

SELLER CONCESSIONS

Up to 4% of the purchase price.

Higher Cost Area's Where You May See A Benefit

These California cities are in the High Cost areas for 2015;

Los Angeles, Anaheim, Long Beach, San Jose, Sunnyvale, Santa Clara, San Francisco, Oakland, Hayward, Santa Barbara, Santa Maria, Santa Cruz, Watsonville

The CA counties are included in the high cost areas;

Alameda, Contra Costa, Los Angeles, Marin, Orange, San Benito, San Francisco, San Mateo, Santa Barbara, Santa Clara, Santa Cruz

These Colorado cities are in the High Cost areas for 2015;

Edwards, Glenwood Springs, Steamboat Springs, Breckinridge

The CO counties are included in the high cost areas;

Eagle, Garfield, Pitkin, Routt, San Miguel

Washington and Arlington - District of Columbia

These Hawaii cities are in the High Cost areas for 2015;

Kahului, Wailuku, Lahaina

The HI counties are included in the high cost areas;

Honolulu, Maui, Kalawao, Kauai

These Idaho cities are in the High Cost areas for 2015; Bailey, Hailey

The ID counties are included in the high cost areas; Blaine, Camas, Lincoln, Teton

The NY NJ PA counties are included in the high cost areas;

Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, Bronx, Dutchess, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Suffolk, Westchester

These New York, New Jersey, Pennsylvania cities are in the High Cost areas for 2015;

Jersey City, Newark, New York

Elizabeth City in NC with counties of Camden, Pasquotank, Perquimans

In DC, VA, MD, WV - Washington, Arlington, and Alexandria

In MA - Vineyard Haven - Dukes and Nantucket

Interest Rate Reduction Refinance Loan for Veterans.

The VA Interest Rate Reduction Refinance Loan (IRRRL) lowers your interest rate by refinancing your existing VA loan. By reducing your interest rate, your monthly mortgage payment should decrease. You can also refinance an adjustable rate mortgage (ARM) into a fixed rate mortgage.

IRRRL Info

• No appraisal or credit underwriting package is required when applying for an IRRRL.
• An IRRRL may be done with "no money out of pocket" by including all costs in the new loan or by making the new loan at an interest rate high enough to enable the lender to pay the costs.
• When refinancing from an existing VA ARM loan to a fixed rate loan, the interest rate may increase.
• No CASH OUT with IRRRL
• 6 month mortgage history required.
• No credit underwriting is required as long as....... Existing loan must not be past due more than 30 days, or the payment doesn't increase by more than 20% if reducing term.
• Credit pulled with a required score of 600.
• May not extend term of the refinance more than 10 years from original term.

IRRRL Refinancing & Cash Out Refinancing A VA Loan

• Must have an existing lien to cash out
• There must be no late payments for the previous 12 months
• Typically allow 90% Value for Cash Out
• 100% Value of;
• Buying out spouse - verified with court order
• Consolidating existing debt & reducing monthly payments
• Payment of any property related liens
• Use for property improvement - requires contractor bid
• 100% value -$500 or less cash at closing to be given
• "Cash Out Letter" explaining the use of the funds.

Here are some of the locations with the highest density of Veterans; Virginia Beach, Norfolk, Riverside, San Bernardino, San Diego, Carlsbad, Las Vegas, Dallas, San Antonio, Fort Worth, Arlington, Jacksonville, Richmond, Memphis, Tucson, Mesa, Albuquerque, Washington DC, Seattle, Arlington, Tampa, Baltimore, Houston, Atlanta, Ventura, Omaha, Bakersfield, Dayton, Columbia, Colorado Springs, Aurora, Oklahoma City, Honolulu, Denver, El Paso, Kansas City, Wichita, Louisville,Cleveland, Raleigh, Pittsburg, Tulsa, Minneapolis, Charleston are all area's with a high population of veterans.

This information is accurate as of the time of posting. Please also verify the accuracy of this information at the time you are considering these options as guidelines change.