VA Purchase Basics

Lenders establish the maximum VA loan amount available to a veteran by determining the veterans VA entitlement. The amount of the veteran’s entitlement is found on his or her Certificate of Eligibility(COE). Most Veterans and Active Duty military personnel qualify to receive a COE. If a veteran qualifies for full entitlement, which is $36,000.00, the veteran can usually borrow up to 100% of the sales price or appraised value of the home plus the VA Funding Fee (VAFF) as long as the loan amount does not exceed the maximum loan amount saleable to GNMA (currently 417,000.00). The Veteran can finance more than $417,000.00 if there is at least a 5% down payment made or if there is below 90% Loan to Value.

The DTI generally must be below 50% to have any chance of getting approved and must be bellow 31% for a manual underwrite and for the best chance for approval. This guidline goes for any full qualification VA loan.

If the veteran chooses to make a down payment from his/her own funds or from gift funds, documentation and seasoning requirements would be the same as for an FHA Loan. (60 days sourced and seasoned funds.)

Non-Occupant Co-Borrowers:

A joint loan refers to a loan made to a veteran and another person(s). All parties will be liable, and all will own the property.

A joint loan is a loan made to:

• **A veteran and one or more non-veterans (other than the spouse).
• **A veteran and one or more veterans (not including a spouse) who will not be using entitlement.
• A veteran and the veteran’s spouse, who is also a veteran, where both entitlements will be used.
• **A veteran and one or more other veterans (not including a spouse), all of whom will use their entitlement. (** Must be submitted to VA for prior approval)

Guaranty is limited to that portion of the loan allocable to the veteran’s interest in the property. Potential maximum guaranty is calculated based on the total loan amount and cannot exceed $104,250 for 2008, even if the available entitlement of the veterans involved adds up to a greater amount. Note: For veteran/nonveteran joint loans, the LGC will contain the statement, “the amount of guaranty on this loan is limited to the veteran’s portion of the loan.”

Any person who uses entitlement on a joint loan must certify intent to personally occupy the property as his/her home.

Closing Costs:

The VA is very specific as to what closing costs may or may not be charged by the lender or broker.

A Veteran MAY PAY the following fees:

• Appraisal Fee
• Compliance Inspection Fee
• Recording Fee
• Credit Report or AUS Fee
• Prepaids (Taxes, Insurance, Prepaid Interest)
• Flood Certification
• Survey Fee
• Title Insurance and Endorsements
• Title Closing Fee
• Government Recording Fees
• Up to a 1% Origination Fee
• Courier Fee(Refinance Only
• VA Funding Fee

A Veteran MAY NOT pay the following fees:

• Doc Prep Fee
• Notary Charges
• Escrow or Settlement Fee
• Application Fee
• Broker Fee
• Underwriting Fee
• Processing Fee
• Tax Service Fee
• Any other fee that is not specifically approved by the VA.

Any Seller Concession or combination of concessions must not exceed 4% of the loan amount. Seller concessions, in regards to VA loans only, do not include normal discount points and payment of the borrowers closing costs when calculating the 4% limit. The Seller is always allowed to pay reasonable point and closing cost fees and such payment is not considered a concession.

Seller concessions allowed for VA purchases may include the following:

• Payment of the VA Funding Fee
• Prepayment of the borrowers taxes and insurance
• Gifts like a TV set or a microwave
• Temporary buydown points
• Payoff of borrower credit balances or judgments

Reserves:

The Veteran is not required to have any additional assets for reserves. The only funds that would need to be verified would be those used to cover the down payment or the closing costs. Assets can however be used as a compensating factor to help secure loan approval.

Land Contract (Lease Option) Purchase Basics:

If a veteran purchased property by way of a land contract and wants to payoff the contract (seller) by obtaining a VA loan, the transaction will be considered a refinance as long as the veteran was put on the title to them home at the time of the execution of the contract.

The maximum loan amount will be determined by the following:

• The VA Appraised value plus the VA funding fee, or
• The sum of the outstanding balance of the loan to be refinanced plus allowable closing costs, discount points, and the VA funding fee.