The VA mortgage program is the best and most flexible home loan program in the country! As a Mortgage Loan Officer and US Navy veteran, I avidly promote this program and focus on serving our active duty and veteran service members every day. I also enjoy the benefits of the VA mortgage program myself. I have used it to purchase my first and second home and have also refinanced with it, both for lower interest rates and also to take out equity to consolidate debts and make home improvements. I know this program inside and out!
For all of the well-known advantages of the program, like flexible guidelines for income, asset and credit history qualification, no down payment requirement, lack of PMI and comparatively low interest rates, there are some fantastic lesser-known features I've taken advantage of to help get my clients into their new Dream Home.
Here are three powerful features of the VA mortgage program you might not be aware of:
1. VA mortgages allow for a co-signer who isn’t a spouse and isn’t a veteran.
Yes, it’s true! You don't have to go get a quick marriage license to be eligible for a VA loan. It’s called a VA Joint Loan, and it’s a great option that many lenders aren’t aware of! There are some
extra requirements, such as a minimum 12.5% down payment being necessary, the co-signer must live in the property, and prior approval from VA is required. This is because the VA is guaranteeing 25% of the veteran’s half
of the loan, while the co-signer is responsible for qualifying for the other half of the loan.
This means the veteran will use a smaller amount of his or her entitlement, and even better, it means the VA Funding Fee will be HALF of what it would normally be. For example, with a 12.5% down payment, the standard VA Funding Fee changes from 1.25% to .625%. If the veteran has a 10% or higher disability rating from the VA, the Funding Fee is still waived as usual. This can be a great option for buyers who are not married and don’t have 20% to put down to avoid PMI on a conventional loan, but one of them is eligible for VA financing.
2. In community property states such as California and Texas, where a spouse’s credit must be pulled and all debts must be listed on the VA application and considered even if he/she is not on the loan, that spouse’s income can be used to offset his or her personal liabilities without that spouse being on the loan application.
They just need to provide income verification (paystubs, W2s, etc) to prove that they earn enough to income to personally cover any personal liabilities on credit (or liabilities like alimony or child support). This is a great way to keep the debt ratio on the application down while also avoiding adding a spouse whose credit score may be too low for qualification for a VA mortgage (Home Mortgage Alliance now allows credit scores down to 580 on VA and FHA applications).
3. For active duty military borrowers, there is no minimum amount of time the borrower must be on active duty to be eligible for a VA mortgage.
There’s a pervasive misconception that the borrower must be on active duty for at least 6 months, but in reality, if the borrower has a valid Certificate of Eligibility showing full entitlement is available, that borrower is eligible for a VA mortgage. This means the active duty service member is not forced to rent at his or her first duty station, and can take advantage of purchasing a home when they transfer instead of renting and waiting, as interest rates and home sales prices continue to rise.
Would you like to know more?
Every loan application is unique, as is each individual’s personal circumstances. You should always consult with local, experienced, and trusted mortgage lender to discuss your options and determine which loan program is best for you.
- By Seth Erickson,
Jun 18, 2018
Should you have any questions about the VA mortgage program or want to discuss your options (or if you want a quick estimate and rate quote for a potential purchase or refinance), I’d be honored to provide you with guidance and unparalleled support. I'm licensed in Colorado and California.