Before applying for a no down payment, 100% financing Utah VA mortgage loan, educate yourself on how this awesome loan program works, and eliminate any potential unpleasant surprises.
First, let’s first clear the four biggest misconceptions when it comes to Utah VA loans:
When you apply for a Utah VA loan, the process will be just like with any other loan program, plus the added VA specific documentation. And guess what: if you decide to switch lenders halfway through, you can actually transfer a VA appraisal, instead of paying and scheduling a new one (typical of Conventional loans).
Work with a loan officer that is responsive and knowledgeable, and provide him/her with all the loan documentation in a timely manner – you will have nothing to worry about!
2. The Department of Veterans Affairs (VA) provides the funding for your Utah VA home loan
A VA loan is in fact a mortgage loan issued and funded by a private lender, but partially guaranteed against borrower default by the VA. From the lender’s perspective, it’s like you’re making a 25% down payment, which makes the mortgage loan extremely low risk.
This guarantee currently extends to 25% of amount specified by the 2015 Utah county loan limits found below.
Every mortgage loan will have closing costs. Because a VA loan is processed like any other loan type, the same fees apply (with a few minor exceptions). Sometimes the sellers of the home you purchase will pay a set amount towards your closing costs. Most times, the interest rate you’ll receive from your loan officer has enough lender credit to cover all or most of your closing costs (this is sometimes advertised as a no-cost mortgage loan).
4. I can only have one VA home loan at a time
NO, NO, NO, NO! False. You can have as many VA loans as your entitlement amount permits (generally about 2, sometimes 3), as long as the new VA home you purchase becomes your primary residence.
To understand how this works , keep reading below to see how the VA mortgage loan guarantee is calculated.
Active and honorably discharged retired military, National Guard members, as well as surviving spouses and other categories can be eligible for VA home loans. The complete list can be found on the official VA website
Once established that you should qualify, go ahead and obtain a copy of your Certificate of Eligibility (COE). You can retrieve it online from the eBenefits Portal, or the lender/broker can request it on your behalf – provided they have a VA loan application from you.
If your Certificate Of Eligibility is not available online for one reason or another, you will need a copy of your DD214 Report of Separation from the U.S. Military. Click here to obtain it online, from the official government website. There is no fee involved. Please safeguard your DD215 copy – VA cannot always retrieve accurate records for you.
On your VA Certificate Of Eligibility, you will notice a certain entitlement code.
This is directly tied to: how you served in the military, if you were in the reserves, if you are an un-remarried surviving spouse, or if your entitlement has been previously restored (requiring a sub-sequent use VA funding fee).
If you’re curious, click here to understand how the VA loan guarantee is calculated, or download the PDF below. This will come in handy especially if you have already used part of your entitlement.
Like always, there are certain limits before a loan amount is considered high balance or jumbo, and subjected to more restrictive guidelines:
Utah and VA loans come with a lot of benefits, such as no down payment requirement, low interest rates, and no mortgage insurance. There is only a slight drawback: the VA funding Fee. See chart below for details.
While not cheap, the VA funding fee is usually a much better alternative to mortgage insurance (especially if your credit score isn’t over 700), and it can be easily financed into your loan amount.
Who can get a Utah VA funding fee exemption?
Utah VA loans can be used to fund the purchase or construction of a home or condominium, as well as the purchase of a manufactured home, and the lot that it will be installed on.
The property financed by a VA loan must become the borrower’s primary residence.
Note that condominium units have to be located in a VA approved project – follow this link to check the eligibility of a condo with the VA.
Basic qualifications include:
I recently had a borrower that had a very hard time locating a VA approved condo in Park City, Utah – he eventually settled on a very nice town house (PUD), which is not subject to condo requirements.
Having the proper VA entitlement amount available is crucial, but there are other qualifying factors to consider, such as your repayment ability (income) and credit history.
While the VA can set some basic criteria, the lenders will often set standards, according to their level of risk comfort.
The minimum credit score required for Utah VA Purchase Loans or Cash-Outs is 580.
High balance loans (over $417,000) also require a 580 minimum credit score.
Streamline Refinances (IRRRLs) need at least a 620 credit without an appraisal, or can go as low as 580 if an appraisal is performed.
Debt to income (DTI)
In order to figure out your debt to income, add together the monthly expenses that show on your credit report (consider only the minimum payment required), along with the new proposed mortgage payment – make sure to include monthly taxes and insurance, as well as any HOA fees.
Then divide that by the amount of gross income (pre-tax) you receive monthly.
Let’s say you have a new proposed mortgage payment of $1,500, an auto loan payment of $300, and a credit card payment of $50. Your total monthly debt would be$1,850.
If your gross monthly income is $5,800, then your debt to income is 1,850÷5,800= 0.32 (32%)
VA loans don’t really have debt to income limitations, provided the residual income of the borrower is exceeded by at least 20%. BUT – lenders generally require an Approve/Eligible result from the underwriting system in order to exceed 43% debt to income ratio. I have yet to receive an Approve/Eligible result for credit scores under 680, unless there are significant compensating factors present on the application (a combination of savings, along with a decrease in the housing payment is a good example).
Residual Income is the amount of net earnings remaining to maintain family living expenses such as food, healthcare, clothing and gasoline.
Here is the residual income family chart for Utah, assuming a VA loan amount of $80,000 and over:
Sources of income require the same documentation as for the Utah Conventional mortgage loan program with a few differences on the rental income:
- A lease agreement is obtained (12 month min)
- Security deposit is documented
Derogatory credit information
- Chapter 7 requires a two-year wait (1 year with documented extenuating circumstances)
- Chapter 13 requires documentation of debt restructure, 12 month on-time payment history, and documentation of the court’s permission to proceed.
*The reason for the bankruptcy must be documented and not likely to reoccur.
No bankruptcy and foreclosures allowed within the past 7 years for High Balance VA loans and Jumbo VA loans.
Foreclosure/ Short Sale
2 year seasoning period is required, and the credit report must reflect a “0″ balance on any mortgage liens included in the foreclosure.
No foreclosure history within the past 7-year for High Balance and Jumbo VA loans.
Modified/ Restructured Loans
A modified or restructured lien on a property other than the subject property is acceptable if:
- No principal forgiveness or reduction has occurred
- The modification or restructure adjusted the terms and/or payment only
- The mortgage must be current with no lates in the last 12 months.
Judgments and Tax Liens
Must be paid prior to/at funding or have a repayment plan with a history of on time payments.
Delinquent accounts (i.e. collections)
Must be satisfied per automated underwriting system results, or underwriter discretion.
Interested Party Concessions
Utah and Colorado VA loans allow interested party concessions up to 4%.
Gift funds on VA loans need to be accompanied by a gift letter, and proper documentation regarding the source of the funds.
Gift funds are not allowed on Jumbo VA loans.
There are so many reasons to get into a new home using a Utah VA loan!
No down payment, flexible credit requirements, access to low government interest rates – VA mortgage loans are not only convenient, they are financially smart!
Currently available VA mortgage loan terms are 15 and 30year fixed interest, as well as 3-1 and 5-1 ARMs (Adjustable Rate Mortgages).
Another perk: VA home mortgage loans are assumable - a welcomed advantage in the sale of your home, especially in a market with high interest rates.
While I tried to cover the most common concerns of borrowers looking for VA loan financing, please do not hesitate to e-mail me your questions: firstname.lastname@example.org
Apply online now, and get one step closer to obtaining the best financing for your next dream home. Use the download button below for a full checklist of documents needed on your VA Purchase loan journey.
Worried about covering closing costs? My quote will always include a choice of 3 interest rates, one of which will cover most or all of your VA loan closing costs.
Or – see if you could potentially qualify for any of the Utah Down Payment Assistance Programs. Funds can be used to cover your closing costs, or VA funding fee charge.
Choose a Utah VA home loan – you earned this benefit!