VA Loans

Point Equity is proud to offer VA loans as one of our premier home financing options. The benefits and terms of VA loans have helped countless retired veterans and their families enjoy the dream of owning a home in California.

What is a VA home loan?

A VA home loan (also known as a Veterans Affairs mortgage) is a loan program designed to make it easier for veterans, active military members, and eligible family members to buy a home.

Since its creation in 1944, the VA loan program has helped more than 22 million veterans and their families purchase and refinance homes.

How do VA loans work?

VA loans are funded by independent VA-approved banks and lenders and guaranteed by the Department of Veterans Affairs. Because of this guarantee, VA loans can offer attractive terms other loans can't, such as a zero down payment requirement, and no monthly mortgage insurance. 

What can you do with a VA loan?

Unlike FHA and other conventional loan options, VA loans can be used in a variety of ways.

VA loans allow you to:

• Buy a single-family home, VA-approved condo, or manufactured home.
• Buy VA-approved condo home, a condominium unit in a VA-approved project.
• Borrow money to build a home.
• Finance the purchase AND remodel of a home.
• Make energy-efficient improvements.
• Refinance an existing VA-guaranteed or direct loan for a lower interest rate.

VA Funding Fees & Waivers

As with most loans guaranteed by a special group or government program, there are often fees charged along with the loan that help keep the program afloat so others might enjoy their benefits in the future.

VA loan funding fees range from 1.25% to 3.3% of the home's purchase price. 

However, the fee can be financed into the total loan amount, resulting in little to no cash out of pocket to close.

Veteran applicants who have a 10% or greater service-related disability logged with the VA can have the funding fee waived. This waiver also applies to surviving spouses of veterans who died while in service or from a service-connected disability.

Benefits of a VA loan

The VA loan program offers many excellent advantages over traditional conforming and other government backed loans. Eligible veterans who may not have been able to qualify for more stringent loan programs, can still enjoy owning a home, and often save a substantial amount of money in the process.  

Some benefits include:

• No mortgage insurance
• No down payment
• Easier to qualify than conventional loans
• Very low interest rates
• Lenient credit standards
• Higher debt to income ratio approvals

Requirements to Qualify for a VA Loan

There's a common misconception that VA loans are hard to get, and require a lot of paperwork to complete.

The truth is there are few requirements beyond the initial eligibility related to service, and the paperwork is comparable to other loans.

In most cases, your mortgage advisor and staff will complete and file the bulk of what paperwork is required and communicate with the lender's underwriters on your behalf. They can even help you obtain the official documents you'll need to confirm your eligibility.

Service eligibility

Simply having been a member of a branch of US military at any point in time is not sufficient in and of itself to allow a veteran to access the significant home buying advantages available with a VA loan. 

Veteran applicants must meet at least one of the following eligibility criteria for a VA loan: 

• Served active duty during wartime for at least 90 consecutive days.
• Served 180 days or more of active duty during peacetime.
• Are a surviving spouse or child of a veteran who died while serving or from complications due to service.
• Have served 6 or more years in the National Guard or Reserves.
• Dishonorable discharges from service are not eligible.

Eligibility is made official when you obtain a valid Certificate of Eligibility (CEO) from the Department of Veterans Affairs. Most lenders can help you request your certificate when you review your home loan needs and get pre-approved.

Credit/Income

The Department of Veterans Affairs considers the VA loan a benefits program for those who qualify and imposes few strict limitations for potential borrowers when compared to conventional loan guidelines.

They rely on the loan underwriters to thoroughly review the applicant's financial information, do their due diligence, and view the entire picture of the borrower to make a final approval determination.

Even a recent bankruptcy doesn't necessarily mean a VA loan will be denied. The reason for the financial snafu in question and the current state of the borrower's accounts are considered important too and factored into the ultimate determination. 

Typically only a 1-year waiting period is required post-bankruptcy for otherwise strong borrowers.

Down payment - 0%

There's no minimum down payment amount required to obtain a VA loan. Putting savings toward the purchase can be beneficial, as it reduces your interest payments over time, and lowers your monthly payment, but it's not a requirement of the program.

If you exceed your county's maximum VA loan limit, a down payment will be required. All counties in California allow up to 100% financing to $510,400 (as of July 2020), and some counties allow 100% financing up to $765,600.

Credit score - no minimum

There isn't a minimum credit score required by the Department of Veterans Affairs if a borrower wants to apply for a home loan with the VA. However, each lender will have its own determined minimum score they aren't willing to lend below.

A score of 620 is considered a lower limit for most lending institutions, and those who allow for lower scores into the high 500's will invariably charge a higher interest rate for scores in that range. 

Credit scores below 620 typically need compensating factors to show they are a reasonable credit risk.

Credit history

Much of the credit history evaluation for a VA loan is flexible and left to the discretion of the individual lenders' underwriting department. It can be beneficial to work with a broker who is familiar with VA loans. They would be knowledgeable about which lenders are particularly averse or ambivalent when it comes to credit history blemishes.

Lenders will look for behavior patterns that show responsible payment behavior in the recent past. An isolated mistake from long ago will matter less than a very respectable recent history of timely, regular payments on current debts.

Debt-to-income (DTI)

Debt-to-income ratio (DTI) measures your current debt obligation against the income you have available to pay those debts. Conventional loans won't approve a loan with a DTI ratio above 50%, and FHA sets their limit at 56.99%. 

A borrower with strong credit history on a VA loan can be approved with a significantly higher DTI than for an FHA loan. The VA doesn't officially set a hard limit on DTI approvals, but some banks institute their own stops at 60%.  

Unlike conventional and FHA loans, non-occupying co-borrowers are not allowed on VA loans. The only co-borrowers permitted on VA loans with 100% financing are spouses. 

Verifiable employment history (minimum 2 years)

VA lenders require 2 consecutive years of full-time (30 hours per week or more) employment for loan approval. If you're a civilian with less than 2 years in the same field, you may be able to count your time in the military, if the work you did while in service is similar to the work you do now.

Self-employed veterans will have to provide at least 2 years' worth of tax returns to satisfy the income requirement, and they should show a year-over-year increase in income.

Exceptions to employment history rules for VA loans include:

• Time away from work for medical reasons or injury
• Maternity leave
• School
• Continuing education in your chosen profession

VA Loan Property Requirements

The VA has a list of requirements a property must satisfy before a loan is approved. This step adds protection for the borrower and helps prevent unexpected and costly surprises down the road.

Eligible property uses

The only acceptable use for a home purchased with a VA loan is to live in it as your primary residence.

Minimum property requirements (MPRs)

A VA appraiser will inventory the home and property you intend to buy and check the boxes off for the minimum property requirements. Appraisal items that determine loan approval are primarily related to safety, sanitation, and structural integrity. Issues that would make the home unsafe, or unhealthy to live in are deal-breakers unless they can be fixed.

Pest Inspections

Conventional and FHA loans don't require pest inspections, but all VA loans in areas determined by the VA to have wood infestation pests (all of California), pest inspections and pest clearance are required. This is the primary concern for sellers when deciding to accept a VA loan.

How to apply for a VA loan

The first step in getting a VA loan is to talk with a mortgage advisor who can help you pre-qualify, usually during a simple conversation, either in person or over the phone. If you both decide a VA loan is a good fit for you, the pre-approval process begins.

Your mortgage advisor can help you obtain your Certificate of Eligibility, collect the necessary financial documents to fill out an application, and you're on your way to shopping for your new home.