Considering a Utah VA mortgage loan?
Before applying for a no down payment, 100% financing Utah VA mortgage loan, educate yourself on how this awesome loan program works.
First, let’s first clear the four biggest misconceptions when it comes to Utah VA loans:
VA HOME LOANS TAKE A LONG TIME TO CLOSE
When you apply for a Utah VA loan, the process will be just like with any other loan program, plus some added VA specific documentation. Should you decide to switch lenders halfway through, you can actually transfer a VA appraisal instead of paying and scheduling a new one.
Work with a loan officer that is responsive and knowledgeable, and provide him/her with all the loan documentation in a timely manner.
THE DEPARTMENT OF VETERANS AFFAIRS (VA) PROVIDES FUNDING FOR YOUR VA 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 2019 Utah county loan limits found below (updated as of 3/14/2019). Or you can use the link to the official Utah VA loan limits.
VA HOME LOANS HAVE NO CLOSING COSTS
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).
I CAN ONLY HAVE ONE VA HOME LOAN AT A TIME
You can have as many VA loans as your entitlement amount permits – generally about 2, sometimes 3. This is called second-tier entitlement, and this official link explains how the VA guarantee is calculated.
The main requirement is that the new VA home you purchase has to become your primary residence.
Utah Conventional Mortgage Loan Eligibility
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 (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 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 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. See the chart below for details.
While not cheap, the VA funding fee is usually a much better alternative to mortgage insurance, and it can be easily financed into your loan amount.
Who can get a Utah VA funding fee exemption?
- 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.
What kind of property can I buy with a Utah VA home loan?
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:
- 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 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 townhouse (PUD), which is not subject to condo requirements.
Do I qualify for a Utah VA home mortgage loan?
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 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. Email me at [email protected] so I can advise on the best course of action.
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.
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 allowed 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.
Debt to income ratios (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 in 2019, 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:
- 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 ineffective income is 75% either verifiable rent received in the past on the subject property or the appraiser’s opinion of a fair monthly payment.
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.
So many reasons to buy 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, but they are also 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 email me your questions at [email protected]
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 in 2019 – you earned this benefit!