Utah VA Home Loans

If you’re a veteran borrower looking to purchase a home in Utah using your VA entitlement, I would love a chance to earn your business. As a mortgage broker I have more lender options and lower rates than the big lenders that claim to serve veterans. Your VA mortgage shouldn’t pay for expensive advertising.

Getting a quote or a second opinion is as easy as sending an email to [email protected]

Onward to THE FOUR BIGGEST MISCONCEPTIONS when it comes to Utah VA home loans. This really applies nationwide as well, but Utah is my home and my target audience. If you’re considering moving here, feel free to reach out! You’ll also want to see if you qualify for this $2,500 First Time Homebuyer Grant. I can help with the process

Misconception #1: VA Home Loans Take a Long Time To Close

When you apply for the Utah VA home loan, the process will be just like with any other loan program.

Unlike with other home loans, the VA appraisals are ordered through the VIP (Veterans Information Portal) lending system and are assigned to specific VA approved appraisers. The cost and  maximum turn times are posted and regulated by the VA, and here is the link with nationwide VA appraisal turn times.

VA appraisal rush fees are not an allowed on VA loans, but I’ve been able to pay for one in the past on behalf of my clients when called for.

Should you decide to switch lenders halfway through, you can actually transfer a VA appraisal instead of paying and scheduling a new one.

Avoid unnecessary “surprises” by working with a loan officer that is responsive and knowledgeable, and provide him/her with all the loan documentation in a timely manner.

Misconception #2: VA Home Loan Funding Is Provided By The Department Of Veterans Affairs (VA)

A VA loan is a mortgage loan issued and funded by a private lender, but partially guaranteed against borrower default by the U.S. Department of Veterans Affairs (VA).

From the lender’s perspective, this is equal to you making a 25% down payment, making the mortgage loan extremely low risk and allowing for better borrowing terms.

As of 2020, if you have full VA home loan entitlement, you no longer have a county VA mortgage loan limit. Not all lenders follow this rule – if you’re getting quoted a higher interest rate because your VA home loan is over the county limit (VA Jumbo home loan), you may want to ask for a second opinion.

If you’re using remaining entitlement, then the new VA guarantee extends only to 25% of amount specified by the 2024 Conforming loan limits in Utah.

Misconception #3: VA Home Loans Have No Closing Costs

All mortgage loans have closing costs.

It’s important to make the distinction between lender closing costs (origination, discount points, processing fees, underwriting fees) and third party and pre-paid costs (title insurance, appraisal, credit report, escrow setup and daily interest).

Lenders advertising “no closing cost” VA home loans are usually being deceitful. They’re either rolling costs into your loan amount on a refinance, or steering you into a higher interest rate that will cover those closing costs.

This is why it’s important to shop your VA mortgage loan. Most importantly, always get a breakdown of the cost in writing.

Seller paid closing costs are always great to have, so ask your real estate agent if they can be negotiated with your purchase offer.

Misconception #4: I Can Only Have One VA Home Loan At A Time

You can have as many VA loans as your entitlement amount permits – generally at least two. Depending on the amounts, a partial down payment may be required.  This is called second-tier entitlement, and this official link explains how the VA guarantee is calculated. You can alway contact me, and I’ll run the numbers for you.

The main requirement is that the new VA home you purchase has to become your primary residence.

Please note that refinancing an existing VA loan into a different type of loan such as a Conventional one DOES NOT automatically restore your entitlement. There is a “one time restoration of entitlement” you can apply for, but outside of that, you would need to sell the property (your spouse can’t retain ownership interest in it either, even if you’re in a non-community state).

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 here, or the lender/broker can request it on your behalf – provided they have a VA loan application from you.

If your Certificate Of Eligibility (COE) 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 DD214 copy – VA cannot always retrieve accurate records for you.

On your VA Certificate Of Eligibility, you will notice there is an 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 subsequent use VA funding fee). 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 – this fee is paid to the VA, and will usually be rolled into your loan amount, so it’s not paid out of pocket.

While not cheap, the VA funding fee is usually a much better alternative to mortgage insurance (which are associated with conventional home loans).

• Utah veterans who currently receive VA compensation for service-connected disabilities
• Surviving spouses of veterans who died in service or from service-connected disabilities
• Veterans who would be entitled to receive compensation for service-connected disabilities if they did not already receive retirement pay or active service pay
• Utah veterans rated by the VA as being eligible to receive compensation – resulted from pre-discharge disability examination and rating.

Utah VA loans can be used to fund the purchase of single family homes (attached or detached), townhomes, condominiums and manufactured homes built after 1976 (that have a HUD tag).

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:

• 50% or more of the building units must be owner occupied
• No more than 15 percent of owners can be behind in Homeowners Association (HOA) fees
• If condos are to be newly constructed, 75 percent of the units must be sold prior to allowing VA loans

I once had a veteran that had a hard time locating a VA approved condo in Park City, Utah – He eventually settled on a very nice townhouse (PUD), which is not subject to the condo requirements. Make sure you check the legal description before making an offer, as some condos can have a townhouse design.

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.

Credit

The minimum credit score required by most lenders on a Utah VA Purchase Loan or Cash-Out is 580.

Do Not Apply For A VA Loan If You Have Multiple Delinquent Accounts Or Late Payments In The Past 12 Months. Absolutely no late mortgage payments in this time period either, it’s an automatic denial.

Email me at [email protected] so I can advise on the best course of action. If your credit needs a good clean-up, here is one credit repair company I can actually vouch for. Pricing details in the video when you follow the link.

VA Streamline Refinances (IRRRLs) will also need a 580 credit score.

Credit History – Derogatory Information

Foreclosure

A 2 year seasoning period is required. A 1 year exception can be made for “extenuating circumstances” beyond the borrower’s control (divorce is generally considered a choice, and therefore not eligible)

Bankruptcy

– 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.

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.

Judgements & 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)

Collections and charge-offs are generally not required to be paid off, but payments payments will be included in the veteran borrower’s debt to income ratio. Minimum payment amounts will be considered at 5% of the outstanding balance.

In other words, these accounts can affect your ability to qualify by increasing your debt to income ratios.

Debt To Income Ratios (DTI)

The debt to income is the percentage of monthly debt you have in proportion to your monthly gross income.

To get an idea of your debt to income ratio, 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.

Divide that by the amount of gross income (pre-tax) you receive monthly.

For example:

Let’s say you have an auto loan payment of $300, and a credit card payment of $50. The proposed mortgage payment you’re trying to qualify for is $3,000/mo

If your gross monthly income is $8,000/mo, then your debt to income is $3,350÷$8,000= 0.42 (42%).

Your loan officer will run your application information through an automated underwriting system (AUS) that will give back a result to day if the results are eligible or not.

You generally want to keep your debt to income under 45% if possible, but higher credit scores can get exceptions, as long as they meet 120% of the residual income required. This is a bit more complicated, and a calculation I can help with.

Residual Income

Residual Income is the amount of net earnings remaining to maintain family living expenses such as food, healthcare, clothing, and gasoline. It’s calculated based on your take home pay (after tax income), your household size, your existing debt and projected new mortgage payment, along with estimated maintenance expenses on the new home (calculated at 14 cents per sqft).

Here Is The Residual Income Family Chart For Utah In 2022, Assuming A VA Loan Amount Of $80,000 And Over:

Sources of income require the same documentation as any other mortgage loan, with a few differences on the rental income:

• If the primary residence is being converted into an investment property, rental income can be used to offset the mortgage payment (but not as income) for the departing residence if:
  • A lease agreement is present or
  • Market rental value can be used if there is no indication that the property will be hard to rent
• If the property purchased is a 2-4 unit, prospective rental income can only be used if evidence indicates that the borrower has a reasonable likelihood of success as a landlord, and the borrower has a minimum of 6 months of mortgage payments in reserves; The amount of rental income to include in the effective income is 75% either verifiable rent, or the appraiser’s opinion of a fair monthly payment.

Interested Party Concessions (seller paid closing costs)

Utah VA loans allow interested party concessions (seller paid closing costs) up to 4%. Consult with your real estate agent to determine what is considered a reasonable amount in your market.

It’s important to note that VA home loans are the only type of loan where seller concessions can be used to pay down the veteran debt in order to help him/her qualify for the loan.

Gift Funds

Gift funds (should you decide to use them) on VA loans need to be accompanied by a gift letter, and proper documentation regarding the source of the funds. contact me for details

Your new VA home loan is only a few clicks away

No down payment, flexible credit requirements, access to low government interest rates – VA mortgage loans are not only convenient, but they are also financially wise.

While I tried to cover the most common concerns of borrowers looking for VA loan financing, please do not hesitate to email me your questions at [email protected]

Apply online now, and get one step closer to the best financing for your next dream home.

Finance your next home with a VA mortgage loan – you earned this benefit!