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FAQ'S
FHA Loan FAQ's
VA Home Loan FAQ’s
FHA Loan FAQ's
1) What is the FHA?
The Federal Housing Administration is an agency of the federal government. The FHA insures private loans issued for new and existing housing, and for approved programs for home repairs. The FHA was created by Congress in 1934, and in 1965 became part of the Department of Housing and Urban Development's Office of Housing. The FHA's mission in the present day includes offering help borrowers get the amounts they qualify for, and to assist lenders by reducing the risk of issuing loans. To get situation-specific information and advice on how you might be able to take advantage of an FHA-insured loan, you'll need to contact an FHA lender to get started. You can search for an FHA lender near you at HUD
2) I have credit problems; will this hinder my seeking help with the FHA?
The FHA recommends a Consumer Credit Counseling program for anyone who fears being denied a loan as a credit risk. You should, as a rule, be in a satisfactory payment situation for at least one year before applying for any FHA loan program. Your credit counselor can address issues such as income-to-debt ratio, how to maintain satisfactory payments for the required time and challenging unfair or erroneous entries on your credit report. It is very important to approach any FHA loan with an improved credit rating if you have had trouble in the past.
3) What kinds of information will I need to gather to get started with the FHA?
The FHA will ask for a lot of information, which will go on your loan application. Be sure to ask your loan officer for a complete list of required data and give yourself plenty of time to gather the information. You will need to provide the FHA with a wide range of details; this includes all the addresses where you have lived in the previous two years, your employers name and addresses for the last two years, plus the amount of your Gross Monthly Salary. If you have had multiple jobs over the last twenty-four months, you will need your W2s for all of them. You will also need your income tax forms submitted for the last two years. If you don't have copies of your W2s, you should contact your employers for assistance. If you need replacement copies of your income tax returns, go to IRS' site and follow the instructions on how to order replacements. A tax transcript is free of charge, and copies of actual tax returns cost thirty-nine dollars.
4) How do I borrow money from the FHA?
FHA loans do not come directly from the FHA. Instead, the FHA is in the business of guaranteeing loans-reducing the risk to lenders and offering increased borrowing power to qualified applicants. This power includes getting better interest rates thanks to the FHA home loan insurance. FHA loans are particularly helpful for people just out of college who want a home, but have little or no money saved for a down payment. The FHA loan is also a good bet for newly married couples, and also those who have had credit problems in the past because of foreclosure or bankruptcy. You can get a wealth of information from a qualified lender, but the first thing you should do is to check out your credit rating and get a list of lending limits for FHA loans in your area. These limits vary from state to state, and may even vary by county depending on where you live.
5) What will be required for me to pre-qualify for an FHA home loan?
There are many factors you will need to pre-qualify for an FHA loan. You should be able to demonstrate employability, job stability and reliability. This reliability includes holding a steady job for at least two years with the same company or employer and increasing or at least consistent income. Any foreclosures on your record should be at least three years old. The same applies for bankruptcy. The FHA loan bottom line-make sure you can demonstrate that you have been a good risk for two years or more and you will have a much better chance at pre-qualifying for an FHA loan.
6) What should I avoid when I start the FHA loan application process?
There is one major mistake potential homebuyers can easily make when applying for an FHA home loan; a major credit purchase. Don't cloud your debt-to-income ratio with a big purchase before closing on your home! Remember that your debt-to-income calculation is based on your current debts and the percentage of that debt to the amount of money you have coming in. Any major credit purchase will seriously alter the balance-sometimes enough to weigh against you when it comes down to FHA loan decision time by the lending institution. In fact, if you can afford to pay off your current auto loan before applying for an FHA loan, it may be a good decision. Don't put yourself at a financial disadvantage to do so, but if you are able, getting rid of any debt on your record will help when you apply for the FHA loan. As always, if you have any doubts at all, consult a financial planner or ask your lender for advice.
7) How can I improve my credit rating before applying for an FHA loan?
One of the most important aspects of getting your credit rating in shape before applying for an FHA home mortgage is time. If you believe your credit is in poor shape, you'll want to establish payment reliability over a period of at least one year before starting your FHA loan paperwork. Another smart idea is to eliminate your debt potential. If you have multiple credit cards, try to pay them down and get rid of one or two of them. This can improve your credit rating by showing you have less potential debt waiting to happen. The FHA loan process hinges on a good credit report. If you have erroneous items on your credit rating, challenge them in writing with the major credit reporting agencies. Be sure to get resolution before you begin work on the FHA mortgage. You may need several months to clear up contested entries on your credit report-its best to begin the contesting process early.
8) FHA Mortgage Insurance
FHA mortgages are insured to protect lenders in case of a default on the FHA loan. An FHA mortgage is advantageous to the borrower because of the reduced cash investment needed to close on a home. The FHA mortgage is possible in part because the FHA is funded solely from income it creates itself. The FHA is not funded by tax dollars, but from the revenue generated by FHA mortgage insurance. This cost is borne by the homebuyer, but the insurance cost ends approximately five years later, or when the FHA mortgage balance is seventy-eight percent of the property value, whichever occurs last. Other home loans have more stringent requirements, but FHA mortgages have flexible payment schedules and more inclusive definitions of monthly income. All of this may be quite confusing to a first-time homebuyer. If you aren't sure why an FHA loan may be right for you, ask your lender to do a side-by-side comparison between the FHA mortgage and the current non-FHA versions. It will soon become apparent which is the best value for your money, especially if you don't have a lot to invest in a down payment.
9) Can I "streamline" an FHA loan?
Streamlining your FHA mortgage refers to a particular kind of refinancing plan. There are costs involved as in any refinancing, and an FHA mortgage must meet certain requirements before it can be streamlined. One of the most important of these requirements; your FHA mortgage must not be delinquent. Timely payment is the key, as with any loan application. Your mortgage must also be currently insured by the FHA, and the purpose of the streamline refinance should be to lower your payments and monthly principal. Streamlining refers to a reduction in the amount of paperwork needed to accomplish the refinancing,
10) I am in the military on active duty. Do I qualify for a reduced rate on my FHA mortgage?
The Service members Civil Relief Act was passed in the 1940s to help military people cope with the requirements of being on active duty while trying to meet their financial obligations at the same time. Did you know that you can get an interest rate reduction to go to no more than six percent per year during your active duty service? This is true of both commercial FHA mortgages, but there is one catch. You must make a request to get this reduced rate. You may also be required to renew your request at periodic intervals as permitted by the Civil Relief Act. Make sure you completely understand the requirements of your lender and the rules of the Relief Act to take full advantage of this important FHA loan benefit.
11) What if I fall behind on my FHA Loan payments?
In some very important circumstances, your FHA mortgage will not be foreclosed upon for ninety days after the payment date. These circumstances include a reduction or loss of income from natural disasters such as Hurricane Katrina, wildfires, and other events if your home is in an area declared by the President as a natural disaster area. There are guidelines for this 90-day delay, and those who are current on their FHA mortgage payments should continue to pay if possible. If your income was reduced because of an injury related to the natural disaster, contact your FHA loan officer right away to discuss the details of your case. You may have more assistance and leniency than you realize as many people are unaware of the full extent of their options in the wake of such natural or manmade disasters recognized by the President.
In other cases, falling behind on an FHA mortgage requires quick action. Regardless of your circumstances, do NOT ignore correspondence from your lender! It is very important to act immediately to avoid foreclosure. A housing counseling agency can be of great help. Contact (800) 569-4287 or TDD (800) 877-8339 to locate the housing counseling agency nearest you.
12) Can I get any help from the FHA once I have fallen behind on my mortgage payments?
Some FHA mortgage situations may qualify for help from the FHA in the form of a one-time payment from the FHA insurance fund. This will help bring your FHA mortgage up to date, but there are requirements. If your loan is at least 4 months, but not more than one-year delinquent and you can start making full payments once again, you may qualify for this special assistance. Be aware that you will have to sign a Promissory Note, and you will have a Lien on your home until the Promissory Note is fully paid off. Remember that this is a one-time only offer, and to protect your credit rating for future FHA loans, FHA mortgages or refinancing packages you'll need to maintain good credit.
13) Are there limits to FHA mortgage loans?
The FHA does set limits on the amount you can get on an FHA mortgage loan. These limits are individually set in each county and state within the United States. You can view an itemized list of the limits at HUD. FHA mortgage loan limits are based upon the Fannie Mae/Freddie Mac limits on regular mortgage loans. They are set according to the type of home-single family, plus two, three and four family dwellings. FHA mortgage loan limits may vary between counties. Check with your lender to get a detailed list of the differences in your area. If you find that mortgage loan limits in a nearby county are more competitive, you may wish to consider buying a home in the area with the higher limit. For many people this won't be a consideration, but if you live on the edge of one county the difference in the limits may offer an advantage.
14) What is the FHA Loan Limit?
The FHA loan limit varies depending on the cost of the area. In high-cost areas, the FHA loan limit can be as high as a little over two hundred and ninety thousand dollars. In low-cost areas, that limit can be around a little over one hundred and sixty thousand dollars. FHA loan limits can change based on factors including average area home prices. Check with your lender to confirm the current FHA loan limit amounts. Remember that loan limits increase with the number of units. A multi-unit home will qualify for a higher rate, but those FHA loan limits are subject to the same factors as single unit homes.
15) What should I know about FHA loan guidelines?
An FHA loan can apply to many different circumstances. Did you know you could qualify for FHA home mortgages for a 'fixer-upper" home? FHA loan guidelines cover this type of buying and several others. The fixer-upper type loan combines the purchase price of the house and the cost of repairs in one agreement. There are also FHA loans available for qualified borrowers over the age of sixty-two, to convert a portion of the equity in a home into cash. The FHA even has financing available for mobile homes and manufactured homes. All of this information can be explained by your local FHA lender, and you can also get help from a HUD-approved counselor by calling (800) 569-4287. Be sure to ask or do research about pertinent state or local programs in your area that can assist you with any required down payment on your FHA loan.
16) What should I know about FHA loan guidelines?
In addition to the other types of FHA loan guidelines that pertain to specific types of purchases such as a fixer-upper home or a mobile home, there is also a special kind of FHA guideline pertaining to loans for energy efficient homes. This kind of FHA loan is called the Energy Efficient Mortgage, also known as EEM. It provides mortgage insurance for the borrower to buy or refinance a residence and include the cost of energy-saving upgrades in the amount. The best part of the FHA's Energy Efficient Mortgage is that the borrower isn't required to qualify for the extra money needed to include the energy upgrades, and there is no down payment required for the extra amount. The rationale behind this kind of FHA loan is that by saving money on utilities, the borrower can afford to make higher payments, or get a larger loan based on those savings. Anyone concerned about the environment, saving money or just getting the most efficient home they can afford should seriously consider the EEM.
17) I'm interested in the FHA loan for a manufactured home, but I don't know whether I am allowed to buy for a unit on my own land or in a mobile home park?
The good news is, according to current FHA loan guidelines, you can get FHA-insured financing for either mobile homes or factory built houses. The loans for mobile homes located in mobile home parks are separate from the FHA loans for people who own the land where the mobile home would be located. Many people don't realize that FHA loan guidelines do permit a retailer to make modifications to a manufactured or mobile home, but such alterations must comply with HUD code. According to FHA loan guidelines, the definition of "alteration" is the replacement, modification, addition or removal of any equipment or installation before the sale to the homebuyer. Your FHA loan officer has more information on FHA loan guidelines for buying mobile homes, but be sure to read "The Manufactured Home Consumer Guide" for up-to-date information on issues, which pertain to your FHA loan.
18) What about refinancing an FHA loan?
Good news! The FHA does allow refinancing on an FHA loan. There are some FHA loan requirements, as always. These include FHA guidelines on the reasons for the refinancing, which must result in lower interest payments and principal on the FHA loan. Additionally, you are not allowed to take out cash on mortgages using the FHA's "streamline refinancing" process. Remember that any amount to be refinanced must already be insured by the FHA in order to qualify. As part of the streamline process, lenders are permitted to include the closing costs into the new mortgage, as long as there is enough equity in the property. An appraisal may be required in order to properly determine the amount of equity on your home. Your FHA lender can tell you more about the refinancing process and what you will need to move forward with refinancing.
19) What are the advantages of refinancing an FHA home?
Refinancing your FHA home is a big decision, but one that can yield profitable results if handled correctly. Many people use refinancing, and an FHA refinance can give you the same benefits as other loans. You can use the FHA refinance to lower your monthly payment, and pay less interest. Some people use the FHA refinance to convert a thirty-year FHA mortgage to a fifteen-year mortgage! This can build equity in your home faster than taking the thirty-year route. Remember that an FHA streamline refinance-where the paperwork is reduced in order to speed the process-requires that you take out no cash on the mortgage, and the amount should be current and not delinquent. If you qualify for an FHA streamline refinancing package, you could be well on your way to higher equity and lower payments.
20) I want to get cash for the equity in my house. Can the FHA help?
According to FHA loan guidelines, some borrowers are eligible for what is known as a "reverse mortgage". This allows the borrower to convert a part of the equity in the home into cash. The FHA reverse mortgage has some unique differences from a 'traditional' home equity loan that can be a huge benefit to anyone who qualifies for the FHA reverse mortgage. One of the best; no payment is necessary until the borrower does not use their home as the "principal residence" or primary dwelling. If the home is converted from the primary dwelling, for example, into a rental property or if the borrowers move into an assisted living community. This feature of the FHA reverse mortgage is quite helpful for those who qualify.
21) What are the requirements for an FHA reverse mortgage?
The FHA reverse mortgage plan is aimed at people sixty-two years old or older. FHA loan guidelines require the borrower to have already paid off the home or owe very little on the home. One of the rules for this type of loan is that the amount owed must be paid off with part of the proceeds from the reverse mortgage. The borrower must also dwell in the home as the primary living space. Applicants are also required to get FHA approved counseling prior to being approved for the loan. The FHA reverse mortgage may have a few additional steps to take before getting the process completed, but the end result is well worth that extra effort.
22) I didn't buy my home with an FHA insured loan. Does this disqualify me from the FHA's reverse mortgage?
FHA guidelines do not require you to have purchased your existing home in order to qualify for the FHA reverse mortgage. Provided you meet all the requirements (age 62 or older, occupying the home as the primary residence, etc) to qualify for a reverse mortgage, you can get approved so long as your property meets HUD requirements. Your new mortgage will be an FHA insured loan, regardless of the status of the prior loan. The approved dwellings for an FHA reverse mortgage include Townhouses, detached homes, units in condominiums and some manufactured homes. Check with your FHA lender to learn more about FHA guidelines on building types or to see if your dwelling qualifies.
23) I looked into getting an FHA loan a while back but decided to wait. What's changed since I last checked?
It's very important to do some FHA loan guideline research before entering into a new application for an FHA loan. Congressional amendments, changes in the structure of HUD or the FHA and other factors may add benefits or new requirements to your FHA loan. An excellent example of this is with the move to FHA's streamline refinancing packages, which in many cases require less paperwork in order to be filed and processed. If it's been more than a year since you last looked into an FHA loan, FHA mortgage or FHA reverse mortgage, check to see what new developments have occurred since last time. Your FHA approved lender can be of help, and you can search online for additional information.
24) I need to have my property appraised and send the results to the FHA. Can I appraise it myself or have a relative in the business do it for me?
All housing appraisals required by FHA guidelines must be performed by appraisers on the FHA roster. This rules out having someone you know do the appraisal unless they meet FHA guidelines and are currently listed by the FHA. The appraisal is a very important part of meeting FHA requirements and it's best to schedule it as early as possible. If there is a lot of FHA activity in your area you could find yourself in for a delay when trying to get your paperwork completed.
25) Why do I need an appraisal of the property?
The FHA must assess the condition of a sale property to determine its market value, but there is another reason for the examination. FHA guidelines require an evaluation of any visible defects or deficiencies that could not only affect the value of the home, but also the safety of the occupants. FHA loans are not intended for homes that do not meet standards. Your health and safety should not be jeopardized by the purchase of a new home; the FHA has rules in place to prevent substandard housing from being passed on to FHA mortgage seekers.
26) Are there any housing scams I should be aware of?
When selling your FHA home, beware of rip-off artists and scammers. They do approach some people offering to "help". Sometimes this comes in the form of an offer pay off the mortgage or give you money after the house is sold. What usually happens is your FHA mortgage goes unpaid, the home gets foreclosed upon (after the scammer collects rent for a while on your property-part of the scam includes a request that you move out quickly) and your credit rating is blemished. The important thing to remember in this situation is to seek professional advice before going into any such relationship with a third party. Unless you pay your mortgage, you may find yourself liable for the results of a deal with a third party. The FHA offers plenty of help and advice, including legitimate ways to deal with your circumstances should you fall behind on your payments or encounter financial difficulties. Always turn to the FHA first before trying to make a deal with a third party.
27) Is there any additional help for me in the form of grants along with what is offered by the FHA?
HUD offers many grant programs that could apply to your circumstances. FHA loans are only one part of the story! It's a very good idea to work closely with your FHA approved lender or a housing counselor to determine if you are eligible for grant monies along with your FHA mortgage, FHA streamline refinancing or other programs. In many cases, those who qualify will want to register early for certain grant programs. Electronic submission is mandatory in many categories, so it's best to plan to file via the internet. Available grants include funding for people with disabilities to find mainstream housing, Self-Help Ownership programs and many more. Some may not be compatible with the types of loans you seek, but a word with your FHA lender will clear up any confusion over which programs work best with FHA guaranteed loans.
VA Home Loan FAQ's
1) Definition of a VA Loan - What is a VA loan?
The VA loan began in 1944 through the original Servicemen's Readjustment Act, also known as the GI Bill of Rights. The GI Bill was signed into law by President Franklin D. Roosevelt and provided veterans with a federally guaranteed home with no down payment. This feature was designed to provide housing and assistance for veterans and their families, and the dream of home ownership became a reality for millions of veterans. VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home, which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fails to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms.
2) Is Using the VA Loan is a Good Idea?
The more you know about our home loan program, the more you will realize how little "red tape" there really is in getting a VA loan. These loans are often made without any down payment at all, and frequently offer lower interest rates than ordinarily available with other kinds of loans. Aside from the veteran's certificate of eligibility and the VA-assigned appraisal, the application process is not much different than any other type of mortgage loan. And if the lender is approved for automatic processing, as more and more lenders are now, a buyer's loan can be processed and closed by the lender without waiting for VA's approval of the credit application.
3) What can I use my VA Home Loan for?
To buy a home (including townhouse or condominium unit in a VA-approved project), to build a home, to simultaneously purchase and improve a home, to improve a home by installing energy-related features, or to buy a manufactured home and/or lot. On manufactured homes, there must be land included with the home and the home must be at least 24 feet wide. The manufactured home must have an identifiable tag.
4) What is the maximum amount of guarantee the VA will allow on a home loan and what is the maximum loan amount?
The maximum guarantee authorized by the VA is 25 percent of the loan amount up to $104,250. The maximum VA home loan is $417,000. The maximum guarantee in the states of HI and AK is 25 percent of the loan amount up to $156,375. The maximum VA home loan in these states is $625,500.
5) What can be done when both husband and wife are eligible?
They may acquire property jointly, but the amount of guarantee on the loan may no exceed the lesser of 40 percent of the loan amount or $36,000 ($104,250 for certain loans over $144,000).
6) I am a Veteran who purchased a home with my spouse utilizing my VA eligibility. I am now divorced and my spouse was awarded the home. How do I get my eligibility back?
When the property is awarded to the Veteran's spouse as a result of the divorce, entitlement cannot be restored unless the spouse refinances the property and / or pays off the VA loan in full or the ex-spouse is a veteran who substitutes their entitlement.
7) I heard the VA has an inventory of foreclosed homes. How can I find out more about this?
The Department of Veterans Affairs (VA) acquires properties as a result of foreclosures on VA guaranteed loans. These acquired properties are marketed through a property management services contract with Ocwen Federal Bank FSB, West Palm Beach, Florida. The properties are listed by local listing agents through local Multi Listing Systems (MLS). A list of properties for sale may also be obtained from Ocwen's website at http://www.ocwen.com/ . If you are interested in buying a VA-acquired property when it is listed for sale by Ocwen Federal Bank FSB, please contact a local real estate broker of your choice to see the property. Interested Listing Brokers and subcontractors may also access Ocwen Federal Bank's website at http://www.ocwen.com/ for information on selling VA-acquired properties.
8) VA Home Loan Entitlement - Isn't the VA home loan automatic? It's one of my entitlements, Right?
Some first-time homebuyers are misinformed as to the workings of a VA Loan. The Veterans Administration does not normally act as a lending agent. Instead, the VA is in the business of guaranteeing the loans of veteran. In most cases, the VA offers a guaranty to those who meet the requirements, the first of which include a good credit rating. If you are considering any kind of home loan, it's best to consult a credit counselor and a financial planner to find out what credit rating you already have and what you can do to improve your credit rating before applying for the guaranty. It's important to know that a VA home loan guaranty is available only if the veteran has the income to handle house payments. A VA loan guaranty is not an automatic benefit. Your financial planner or credit counselor can go a long way towards helping you prepare your personal finances before filling out that home buyer's paperwork.
9) The VA Guaranteed Loan - Advantages
If you are looking to purchase a home with no money down, you're in luck if you qualify. VA mortgage loans can be guaranteed with no money down in most cases up to $417 thousand dollars. An added bonus? No private mortgage insurance requirement with a VA guaranteed loan. The VA even offers help for those looking to refinance. Don't investigate these benefits without asking for information about the interest rate reduction loan, part of something called the Streamline Refinancing Program, which allows veterans to refinance at little or no expense to them. VALoans.com can give you all the details you'll need to take full advantage of your VA home loan benefits.
10) Adjustable Rates - Do I have to take a fixed-rate VA loan?
Veterans who shop around will learn it's possible to get a fixed rate loan, negotiated with the lender of your choice. Another option? The adjustable rate loan, where interest may be adjusted one percent annually, up to five percent over the duration of the loan period. Which to choose? No matter which way you think is best, do your homework, shop around and get the best rate possible. Some make the mistake of taking the first offer that sounds fair, but don't be intimidated by the process. You may be eager to get the "hard part" over with and get into a home. Take some time to research the biggest purchase of your life! When in doubt, consult an expert, a legal advisor or a trusted friend in the real estate business. The more research you do, the better you'll feel at closing time. The VA is in the business of loan guaranty, but the choice of which loan to take is strictly up to you. It's also a good idea to look for businesses who make a habit of cultivating customers who are veterans--you may find their expertise in VA matters quite valuable to reduce unnecessary waiting times on paperwork.
11) Get Pre-Approved / Should I get a pre-approved loan?
Obtaining pre-approval for your VA loan amount is an excellent time-saving step. Once you know the exact amount you're eligible for in your VA home loan, you can begin searching for a home as a 'serious buyer'. You'll know in advance exactly what you can afford and what is outside your price range. It's the kind of security you'll be grateful for as you search for the best value for your money. With pre-approval, you avoid wasting time with property that's out of your price range or sellers who are unsure whether you mean business.
12) Are You Eligible for a VA Home Loan Guaranty - How do I get proof of eligibility?
It's easy to use an online program called ACE--the Automated Certificate of Eligibility--to get started in the VA loan guaranty process, yet can only have this done by a VA approved lender. Unfortunately, the automated system won't work for everyone. Some people don't have enough information in the ACE database, and are required to fill out a VA Form 22-1880, a Request for Certificate of Eligibility. If this applies to you, simply fill out the form and mail it to your regional Eligibility Center along with supporting paperwork including a copy of the DD214 discharge paperwork. Don't send originals of the DD214, a photocopy will do. The certificate of eligibility process can be tricky for veterans who were separated from the military with a discharge other than honorable. In this case the VA must investigate the discharge to insure it was not classified as dishonorable. People who fall into this category should seek help from their local VA office, especially if you need to file an appeal to the results of your request of eligibility.
13) Your Discharge May Affect Your Chances - I don't have an honorable discharge. Am I automatically disqualified from VA loan eligibility?
The nature of your discharge can affect your eligibility for a VA loan. The certificate of eligibility process gets complicated for veterans separated from the military with a discharge other than honorable. In these cases the VA checks to see if the discharge was classified dishonorable. If you had an 'other than honorable' discharge, seek help from their local VA office, it's best to get some expert advice on what additional information to file, where to send the paperwork and what to do if an appeal is necessary. Be sure to include copies of your DD214 form, plus any paperwork or documentation showing that you either didn't receive a dishonorable discharge, or had your discharge upgraded, modified, or corrected.
14) I Lost My DD214 - What if I can't find my DD214 form?
Those who have been discharged, separated or retired should keep multiple copies of the DD214--your discharge paperwork. It's the most important military document in your records. This is proof of your military status, whether you are retired, separated, discharged. It also displays the nature of your discharge, and what your status is with the National Guard or a Reserve Unit. The lack of a DD214 form can bring some of your VA processes to a halt, but fortunately you can get a replacement copy by writing to the National Personnel Records Center. Enclose a completed form SF-180 along with a letter stating the reason for your request, you name, rank, social security number. If you are a recently discharged military member who separated or retired at an overseas location, remember that your DD214 form may be delayed overseas for up to a year before it becomes part of the National Record Center archives. If this is the case, you contact the orderly room, First Sergeant or Sergeant Major in charge of where you separated or retired and request a copy directly from your final base.
15) Already Have a VA Loan? - Is it possible to use my VA eligibility more than once?
Check with your lender about interest-rate reduction refinancing on your existing VA loan. This is a great advantage and there's no need to re-establish VA loan eligibility. Instead, ask your lender to use the VA's "email confirmation procedure". You may also re-use your VA loan eligibility for another VA loan. The requirement here includes having completed payments on the previous note, and you must no longer own the property. When applying for re-eligibility, include copies of the paperwork that proves your old VA loan has been paid off-a "paid-in-full" letter from your bank, or a copy of the "HUD-1 settlement statement."
16) A One-Time Deal / What is the one-time exception for renewing VA eligibility?
A VA certificate of eligibility is renewable on a one-time basis. You qualify if the existing VA loan is paid in full, but you still own the property. Under the rules, you ordinarily must prove the property has been sold, but thanks to the one-time exception you may renew the VA certificate of eligibility. All you need to do is complete VA form 26-1880 and send it to the nearest VA Eligibility Center. Remember that getting released from liability for a VA loan or having a debt waived by the VA is not the same as paying off the loan. In that case you'll have to pay back the government's loss. Once that is done, the certificate of eligibility may be renewed.
17) Partial Eligibility - Can I get eligibility for another VA loan even though I am still working on the first one?
If you have an existing VA loan, you may still be able to get VA loan eligibility for second loan. A VA certificate of eligibility may be available for any unused amount of what you are entitled to receive. You'll have to negotiate a downpayment with the lender, and your leftover eligibility may not be sufficient for the entire amount of the second loan. Partial eligibility is sometimes complicated, and it's best to get the advice of a VA rep before filling out any paperwork.
18) VA Loans and Rental Properties - Can I use my VA loan to buy a rental property?
The idea of buying a building intended as a rental property is sound-but VA mortgages aren't intended for this purpose. If you buy a home with a VA home loan, you must certify that you intend to "personally" live in the house. There are naturally exceptions made for houses that are in the building stages when the sale is made, but the general rule is you must occupy the house within sixty days of the loan closing. The occupancy requirement applies to all VA guaranteed loans except one; the Interest Rate Reduction Refinancing Loan or IRRRL. For these loans, the veteran is required to certify that the dwelling was previously occupied as the home.
19) Bankruptcy and VA Eligibility - What happens if I file bankruptcy and wish to buy another home at some point?
Veterans who file for bankruptcy are still allowed to use a VA home loan if they are eligible. Unfortunately the process does require a waiting period. You are allowed to purchase another home two years after the "discharge date" of your bankruptcy. Keep in mind that the filing date does not factor in-you must wait the two years after bankruptcy has been discharged. Once you are eligible to buy another home, the usual credit and income requirements apply.
20) VA Loans and Your Debt Ratio - How is my VA home loan eligibility determined? To qualify for a VA home loan, you must fall into a certain debt ratio. Your income, credit card debts and the new indebtedness created by the VA mortgage are all tallied up to see where you land in terms of debt. The maximum debt ratio you may have and still qualify for a VA home loan is 41%. This is only one factor used to determine eligibility, the others include your reliable income and credit rating. If you are considering applying for a VA home loan, you may wish to make an appointment with a financial planner and debt counselor to see how you might improve your standing in advance of the application process.
21) The VA Loan for Home Equity Refinancing - Can I refinance with the VA?
If you own a home and are considering refinancing, VA refinancing may be just what you need. Under the terms of VA refinancing, your current real estate debt is paid out of the proceeds of a new VA mortgage. The requirements? The same borrower must use the same property as before. This type of refinancing is also known as a 'Cash Out' refinance, and is only good for homes that are used as the owner's residence. Refinancing is available for up to 90% of the appraised value plus all closing costs in many cases. Your home must have enough equity to cover the loan. These terms may not be available in all states, depending on local lending laws. Check with your local VA rep to learn more.
22) What VA Loans Are Used For - Am I limited to buying an existing home with a VA loan?
A VA home loan has more flexibility than you might think. While many use this benefit to purchase existing homes, there are many other applications. Did you know you a VA home loan may be used to purchase and improve a home at the same time? You may also use a VA loan to improve your existing home by increasing energy efficiency. There is also a provision for people to use a VA loan to purchase a manufactured home and lot, under the right conditions. There are many applications for a VA home loan, sometimes all you need to do is ask!
23) Does the VA Charge A Fee? - Are there fees associated with my VA home loan?
There is a "VA funding fee" required by law. A first-time buyer will pay a little over two percent for a 'no money down' loan, and a second time buyer's fee is just above three percent. The reason for the fee includes the idea that the veteran is reducing taxpayer burden by contributing to the cost of his VA mortgage. The higher fee for second-time borrowers presumes that there is equity in the home, or the borrower has had plenty of time to save in order to pay for the extra percentage. There is also a fee for VA refinance loans, and they fall within the same general price guidelines; just above two percent for first-timers and just above three percent for those who borrow again.
24) VA Fees Part 2 - Who is exempt from paying the VA funding fee?
While there is a funding fee for a VA home loan, some people are exempt from paying. If you are a veteran getting disability compensation for service-related medical issues, or are entitled to get compensation if you aren't drawing retirement pay, you are exempt from the VA funding fee for your VA home loan. Also, surviving spouses of those who died in the service, or from service related disabilities are also exempt. It doesn't matter in this case whether the spouse has any of their own entitlements. Remember that the VA has the last word on who is exempt, and some issues may be dealt with on a case-by-case basis. If you have any doubts, ask your local VA rep to review your service records (or your spouse's records) and get a determination from the VA.
25) Co-signers on VA Loans / Can I bring on a co-signer on my VA home loan?
It's true that the legally married spouse of a military member or veteran can co-sign a VA loan. There is no "penalty" for doing so, the veteran loan is still fully guaranteed by the VA. Two unmarried military members are also able to co-sign on a VA loan with the same results. When a military member or veteran wants to bring an unrelated, non-military cosigner, the VA allows this with one major exception. The VA guarantee is limited to the amount of the veteran's interest in the property. Some companies won't allow these types of "mixed" loans, so you may have a bit of shopping around to do before finding a lender willing to work with you. If you find yourself in this position, give yourself plenty of extra time to hunt for the right lender.
26) The Veterans Benefits Act of 2004 - How does the Veterans Benefits Act change my loan process and entitlements?
The Veterans Benefits Act of 2004 made many changes to the VA loan process. If you haven't had to get eligibility or otherwise deal with the VA for a loan since the act passed, you may be surprised at the changes. One of the major differences; the maximum guaranty amount of $60,000 has been modified. Now, for qualifying loans in excess of $144,000, the maximum is a sum equal to 25 percent of the Freddie Mac conforming loan limit, which is determined under the Federal Home Loan Mortgage Corporation Act. If you feel your VA mortgage may be affected by changes created by the Veterans Benefits Act, contact your lender for more information.
27) Fair Housing - I think I may be encountering discrimination in my search for a home. Can the VA help?
Federal law requires lenders who participate in VA home loans to obey Fair Housing Laws. The law prohibits a great many things including refusal to negotiate, false claims that a residence is sold or otherwise unavailable, and discrimination in financing. Chances are you won't be confronted by these problems, but in the event you do experience something you perceive to be in violation of Fair Housing laws, you can report the activity to your local VA office. The local office will investigate your complaint, which you file by filling out VA Form 26-8827, Housing Discrimination Complaint form.
28) I Can't Find A House - Do I have any alternatives?
Those with VA loan eligibility or pre-approval may, depending on the location, have trouble finding new homes for sale. Fortunately, there are alternatives. In many areas, the VA can offer repossessed homes available for purchase to qualified buyers. You may also wish to inquire about state programs. Much the same as your veteran educational benefits, individual states offer veteran programs independently of the your federal benefits. Contact the VA office in your area to learn what may be available. Every state has different options, you may find just what you are looking for! Don't forget that the qualifications and requirements may also differ from federal guidelines.
29) VA Foreclosures - Can I use a VA loan to buy a repo house? Does the VA have any such homes?
It's true, the VA does get control of properties with VA loan foreclosures. VA foreclosures are offered to the public in the same manner as repossessed HUD and USDA Development homes. If you are interested in one of these foreclosed single family houses, check the government website http://www.homesales.gov/ to see what might be available in your area. There are many different agencies offering homes on the website. Eligible buyers should contact a broker to have the Offer to Purchase And Contract of Sale VA form completed and submitted. All the routine eligibility and credit terms apply, as with any housing purchase. Check with your lender if you are unsure of the terms and conditions of purchase.
30) Improving Credit - How can I help myself before applying for a VA home loan?
Because your VA loan eligibility depends on your debt ratio, it's a good idea to start thinking about fixing your credit long before actually filling out loan paperwork. The best way to help yourself out is to follow the advice of a credit counselor, but you can also take steps on your own to increase your eligibility for a VA home loan. Eliminate as much credit card debt as possible. If you can get yourself down to a single card and stay that way for six months, you will be well on your way to improving your debt ratio and your credit rating. Remember that the maximum debt ratio allowed for approval is 41%, and that your credit rating is also a factor. If you are within a few months of paying off a major debt such as an automobile loan, do so as quickly as possible. You'll most likely need to allow for credit reporting agencies to "catch up" with your newly paid off cards and loans.
31) VA Homebuyer's Help? - What sort of advantages or help does the VA offer in the homebuying process?
When applying for a VA home loan there are some advantages to having the VA on your side during the home buying process. Did you know that VA loans offer limitations on closing costs? The VA also offers leniency to qualified VA borrowers who are having temporary financial problems. Other benefits of a VA home loan include long terms of repayment, prepayment rights (with certain guidelines) and under the right conditions, no downpayment required. You are also entitled to get an accurate assessment of the reasonable property value of your proposed purchase. These are just a handful of the added benefits of applying for a VA home loan.
32) Homebuyer's Help Part 2 - Will the VA give me help if my property is poorly built or defective?
The VA has a great many ways to assist those seeking a VA mortgage, but there are also restrictions. When you purchase a home using a VA home loan, the VA does not offer guarantees that your home is free from defects. While the VA does conduct an appraisal of the property, this should not be misconstrued as an 'inspection' or approval of the condition of the property. The VA does not order builders to correct problems or defects in the construction of your home. It's the buyers responsibility to seek expert advice about the condition of a property before purchase. Additionally, the VA cannot offer legal counsel of any kind. The buyer is responsible for being informed about rights and responsibilities with regard to new property purchases. When in doubt, hire a lawyer or an expert in property evaluation.
33) "Farm Loan"? - Can I buy a farm with a VA loan?
A veteran generally cannot get a VA loan to purchase a farm with one notable exception. If the farm has a residence where the veteran intends to live. There is no 'farming requirement' for this kind of purchase, but if the veteran does intend to operate a farm business as a major source of income for loan qualification purposes, it's required to show that the business can turn a profit. There are other options available to veterans who wish to operate a farm. The Farmers Home Administration does show preference to veterans, and can be used as a way to finance veteran-owned farm operations.
34) Foreign Purchases - Can I purchase outside America?
The VA does not allow veteran mortgages for properties outside the United States. The VA does allow purchases in "American territories and possessions". These areas include Puerto Rico, Virgin Islands, American Samoa , Guam, and the Northern Mariana Islands. If your proposed purchase is in one of these areas, you should be able to apply in the usual ways, but check with your VA rep for any special requirements or conditions based on the laws which cover lending in those territories. (Our company, www.valoans.com, only originates VA home loans for properties in the United States.
35) What If I Die Before Paying Off My VA Loan? - What if I die before paying off my VA loan?
Unless mortgage life insurance is purchased, the responsibility of a veteran mortgage passes to the spouse or the veteran's estate in the event of his or her death. There is a continued obligation to make payments, but don't forget the VA's "Leniency Policy" with regard to forbearance for qualified borrowers who fall on temporary hard times. Mortgage life insurance can take care of this issue once and for all, but it is not offered through the VA. You'll need to find a qualified private insurance company to make these arrangements. The terms of such insurance may vary from agency to agency.
36) Selling My VA Loan Property - Once I sell my property, am I released from my VA loan obligation?
Some people may assume that selling the property purchased with a VA loan releases them from obligation to the VA loan. This is not automatic! The borrower must notify either the VA or the lender and request that liability be transferred to the new owner. The borrower needs to request a 'release from liability" notice from the VA. There is an exception to this policy for those with loans closed before March 1, 1988. In these cases no notification is required, but it is a very good idea to request a release from liability from the VA anyway.
37) Mortgage Payments - What happens if my mortgage is sold to another mortgage company?
Chances are you will make payments to different lenders over the course of your VA mortgage. Selling mortgages from lender to lender is common, and sometimes a VA mortgage payment is sent to the old loan holder because notification of the new owner of your loan and your payment became crossed in the mail. If this happens, you may receive a notice of non-payment from the new loan holder. Don't delay in contacting the new owner of your VA mortgage to straighten up the problem. While it is technically up to the two lenders to fix the matter, your credit rating and payment schedule could be affected if you don't act accordingly.
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