Financing Your Owner Occupied Investment With A VA Loan

For VA home loan purposes, a veteran is a person who has served or is currently serving on active duty in the United States Military or Coast Guard and who was discharged or released from active duty under conditions other than dishonorable. Un-remarried surviving spouses of an eligible service member who died as a result of service or service-related injuries may also be eligible.

TERMS

Fixed rate fully amortized 15 and 30 year terms

ELIGIBLE PROPERTY TYPES

1 – 4-unit single family detached homes

PUDs

Townhouses

Condominiums—per VA guidelines

1. CONDOMINIUMS

   All condominiums must be on the VA approved list. To avoid an unnecessary appraisal fee, a condominium unit should not be appraised unless there is a reasonable likelihood that VA or HUD will accept the project prior to loan closing.

   Please Note **The link below may be used to determine if a condominium project is VA Approved. Properties located within Planned Unit Developments (PUD) do not require VA Approval.

   Search Condo Approvals

   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.

W-2s for the last two years

Signed Federal tax returns for the past 2 years for self-employed borrowers and rental income/loss

1. Rental Income *** In order to consider verified rental income from any other property(s) not securing the VA loan, documentation of at least 3 months mortgage payment(s) (PITI) is required. Rental income verified as stable and reliable may be included in effective income. If there is little or no prior rental history on the property, make a determination based on review of the applicant’s prior experience managing rental units or other background involving both property maintenance and rental; any existing leases on the property along with the strength of the local rental market. If rental income is not considered, documentation of reserves is not required.
2. Rental Income *** Multi Unit Property Securing the VA Loan (2-4 units) cash reserves totaling at least 6 months PITI along with documentation of the applicant’s prior experience managing rental units is required.The prospective rental income considered for qualifying is 75% of verified prior rent(s) collected on the units (existing property) or the appraisers opinion of market rent on (new/proposed construction).
   Rental Income*** Property the applicant occupied prior to the new VA Loan, use the prospective rental income to offset the mortgage payment on the rental property and only if there is no indication the property will be difficult to rent. This type of rental income may not be included in effective income. It may only be used to offset the mortgage payment on the departed residence. Obtain the following documentation:
   1.) Copy of fully executed lease agreement 2.) Evidence of receipt of security deposit
   Please Note – If the applicant can support the mortgage payment (PITI) without any rental income, neither the landlord experience nor reserves are required.

   “Other” Types of Income *** If it is reasonable to conclude other types will continue in the foreseeable future, include it in effective income. The follow list of “Other” types of income which may be considered include, but are not limited to:

   • Pension or other retirement benefits
   • Disability income
   • Dividends from stocks • Royalties

MAXIMUM FINANCED PROPERTIES

The maximum number of financed properties that the borrower(s) can have is four (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

Base Loan Amount -

Above County Loan Limit - $750,000

Minimum FICO - 640

Required Reserves - 2 Months PITI

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

Minimum FICO - 680

Required Reserves - 4 Months PITI

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

Minimum FICO - 720

Required Reserves - 6 Months PITI

MINIMUM LOAN AMOUNT

There is no minimum loan amount.

OCCUPANCY

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

RESERVE REQUIREMENTS
RESERVES – must be liquid, readily accessible funds (e.g. checking, savings, money market, non-retirement investment account(s) such as stock or mutual fund accounts)

1. Cash reserves are required under the following circumstances:
   • If the borrower uses rental income to qualify and the subject property is 2-4 units, six (6) months cash reserves must be documented.
   • 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

Seller concessions include, but are not limited to, the following:

Payment of the buyer’s VA funding fee

Prepayment of the buyer’s property taxes and insurance

Gifts such as a television set or microwave oven

Payment of extra points to provide permanent interest rate buydowns

Provision of escrowed funds to provide temporary interest rate buydowns,

Payoff of credit balances or judgments on behalf of the buyer

Seller concessions do not include payment of the buyer’s closing costs or payment of points as appropriate to the market.

Any seller concession or combination of concessions which exceeds 4% of the established reasonable value of the property is considered excessive, and unacceptable for VA guaranteed loans. 

Here is a link to VA's site with the maximum VA loan limits, in 2015. This year it is the same as FHFA or Freddie Mac and Fannie Mae's guidelines. 

VA Loan Limit Look Up.

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.

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 we lend in, but are not limited to. Virginia Beach, Norfolk, Riverside, San Bernardino, San Diego, Carlsbad, Las Vegas, Dallas, Fort Worth, Arlington, Jacksonville, Richmond, Memphis, Tucson, Albuquerque, Washington DC, Tampa, Baltimore, Houston, Atlanta, Ventura, Omaha, Bakersfield, Dayton, Columbia, Cleveland 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.