VA Mortgage

The Veterans Mortgage or VA loan was originally known in 1944 as the Servicemen’s Readjustment Act, or, the GI Bill of Rights. The GI Bill became law  courtesy of President Franklin D. Roosevelt. The law provides U.S. veterans an opportunity to obtain a federally insured & guaranteed home loan with no down payment. Since that time about 30 million service men and women have taken advantage of the Roosevelt’s Bill.

Important: The first step to home ownership for a discharged veteran is to obtain your DD214 “Certificate of Release or Discharge from Active Duty”. This is done by submitting the required Form 180 to VA to obtain your Certificate of Eligibility form, or, you can request a DD214 online here.

VA Mortgage Basics:

• No down payment required
• Must document income
• FICO score 640+ required
• Not restricted to 1st time home buyers
• Can use the VA loan program multiple times
• Low competitive interest rates
• No monthly mortgage insurance
• 41% Debt-To-Income Ratio
• No pre-payment penalty
• Must meet veteran status eligibility requirements
• Up-front funding fee applies
• Subject to county loan limits
• Seller closing cost credit allowed up to 4%

Military Service Requirements for VA Loan Eligibility:

Note: Generally speaking, almost all active duty & honorably discharged service members are eligible for VA home loans. Here is the fine print.

Wartime Active Service - 90+ days on active duty and not have been dishonorably discharged.

Peacetime Service - 181+ days of continuous active duty, completed the full period for which you were ordered or called, and not have been dishonorably discharged.

Presently Active Duty Service Personnel

If you are now on regular duty (not active duty for training), you are eligible after having served 181 days unless discharged or separated from a previous qualifying period of active duty service.

Selected Reserves or National Guard

6 years in the Selected Reserves or National Guard (member of an active unit, attended required weekend drills and 2-week active duty for training) and

• Were discharged with an honorable discharge, or
• Were placed on the retired list, or
• Were transferred to the Standby Reserve or an element of the Ready Reserve other than the Selected Reserve after service characterized as honorable service, or
• Continue to serve in the Selected Reserves

Discharged for a Service-Connected Disability. Lesser time periods are allowed if discharge occurred earlier due to a disability.

Unremarried Surviving Spouses/Spouses of POW or MIA Service person:

• Are an unremarried spouse of a veteran who died while in service or from a service connected disability, or
• Are a spouse of a service person missing in action or a prisoner of war
• A surviving spouse who remarries on or after attaining age 57, and on or after December 16, 2003, may be eligible for the home loan benefit. However, a VA must deny applications from surviving spouses who remarried before December 6, 2003 that are received after December 15, 2004.

Eligibility may also be established for:

• Individuals with service as members in certain organizations, such as Public Health Service officers, cadets at the United States Military, Air Force, or Coast Guard Academy, midshipmen at the United States Naval Academy, officers of National Oceanic & Atmospheric Administration, merchant seaman with WW II service, and others.

VA Funding Fee for  Loans Closed On Or After November 22, 2011:

Regular Duty

Down Payment%     1^st Time User      Subsequent User

0-5%                                    2.15%                    3.30%

5-10%                                  1.50%                   1.50%

10%+                                   1.25%                    1.25%

Reserve/National Guard

0-5%                                      2.40%                   3.30%

5-10%                                    1.75%                    1.75%

10%+                                     1.50%                     1.50%

Service Related Disability – Funding Fee Is Potentially Waived

Maximum Loan Amounts for VA Loans in Massachusetts

Tips & Traps

Tips:

• Obtain your DD214 eligibility form – this will be required for the lender
• The Seller is required to pay for a termite inspection – be sure to make the seller aware of this when submitting your offer
• Accuracy Matters – make sure to provide your lender with a complete financial picture & all of the information requested
• Inform your lender of any changes to your credit including credit inquiries, new accounts opened, or recent late payments
• Always provide full bank or retirement statements that include your name/address/institution/full account#/all pages. If it says page 1 of 5, all 5 pages will be required even if page 5 is a blank page
• Provide documentation after an approval is issued as quickly as possible

Traps:

• Even though VA loans require 0% down, remember to still budget for inspection fees, appraisal fees & closing costs
• Must be 2 years out of Bankrupcty with NO lates after discharge
• Do not deposit any money into your bank account (other than payroll checks) until first talking with your loan officer. NEVER deposit cash into your account during the mortgage process
• Do not open up any new lines of credit or pull your credit until you have closed on your loan
• Work with your lender. Sometimes it may seem like the lender is asking for too much paperwork, or irrelevant paperwork. The lender is just following guidelines. They are not picking on you. Try to be thorough, organized and review all of your documentation before sending it over to make sure it is complete.

Remember: Your lender is your best friend during this process. Be patient and work them. The road to home ownership requires team work between you, lender, attorney & real estate agent.