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VA home loan questions

Nice two story home with a sold sign23. Can a VA loan be used for a vacation home?

Unfortunately, the VA home loan program is only permitted for owner occupied principal residences. See eligible properties

24. Can a VA loan be used to build a house?

The Veteran's Administration allows for the construction of a new home.

25. Can I get a VA loan if I had a foreclosure?

Once again, the lender will decide whether to offer a mortgage with a past foreclosure, however, here is the VA's position on obtaining a VA loan after a foreclosure:

The fact that a home loan foreclosure (or deed-in-lieu of foreclosure) exists in an applicant’s (or spouse’s) credit history does not in itself disqualify the loan.

Develop complete information on the facts and circumstances of the foreclosure. Apply the guidelines provided for bankruptcies filed under the straight liquidation and discharge provisions of the bankruptcy law. See the preceding heading entitled “Bankruptcy.” If the foreclosure was on a VA loan, the applicant may not have full entitlement available for the new loan. Ensure that the applicant’s Certificate of Eligibility reflects sufficient entitlement to meet any secondary marketing requirements of the lender. Source: VA Pamphlet 26 - 7, Revised Chapter 4: Credit Underwriting

26. Can the seller pay all closing costs on a VA loan?

The seller is permitted to pay all ALLOWABLE closing costs on behalf of the veteran borrower. Typical closing costs include origination fee, appraisal fee (the vet pays for the appraisal fee at application, and is reimbursed at settlement), title insurance, and other title costs, discount points (if applicable), credit report (the vet pays for the credit report at application and is reimbursed at settlement), well, septic and termite inspection fees (if applicable), flood certification, etc. Allowable closing costs are generally, any cost customary to the location of the home, and is paid to a third party; and necessary for settlement.

The lender may charge the veteran a flat charge not to exceed one percent of the loan amount (origination fee).

The following list are costs that cannot be charged to the veteran as “itemized fees and charges. ” Instead, the lender must cover any cost of these items out of its flat- fee (Non-allowable closing costs are):

amortization schedules, pass books, and membership or entrance fees,
attorney’s services other than for title work,
commitment fees or marketing fees of any secondary purchaser of the mortgage and preparation and recording of assignment,
document preparation fees,
escrow fees or charges,
fees charged by loan brokers, finders or other third parties whether affiliated with the lender or not, and fees for preparation of truth-in-lending disclosure statement,
interest rate lock-in fees,
lender’s appraisals,
lender’s inspections, except in construction loan cases,
loan application or processing fees,
loan closing or settlement fees,
notary fees of mortgage to such purchaser,
postage and other mailing charges, stationery, telephone calls, and other overhead,
preparing loan papers or conveyancing fees,
tax service fees,
trustee’s fees or charges,

The home seller can pay all the allowable closing costs on behalf of the veteran . . . period. Even if the allowable closing costs exceed 4%. The 4% rule is intended to limit inducements to purchase the home:

Seller concessions include but are not limited to, the following:
payment of the buyer’s VA funding fee
prepayment of the buyer’s property taxes and insurance
gifts such as a television set or microwave oven
payment of extra points to provide permanent interest rate buydowns
provision of escrowed funds to provide temporary interest rate buydowns, and
payoff of credit balances or judgments on behalf of the buyer.

Seller concessions do not include payment of the buyer’s closing costs, or payment of points as appropriate to the market.

The real estate tax escrow and prorations costs may be paid by the home seller up to 4% of the sales price.

Do not include normal discount points and payment of the buyer’s closing costs in total concessions for determining whether concessions exceed the four percent limit. Source: Seller Concessions - Chapter8.PDF

27. Can the VA funding fee be rolled into the loan?

The funding fee is allowed to be financed. See VA funding fee table

28. Do I have to escrow my property taxes with a VA loan?

The VA does not require the home buyer/homeowner to escrow the property taxes and homeowner's insurance, however, it's the lender who is lending the money, and the lender can require a tax and insurance escrow. Source: Chapter 9: Escrows for taxes and insurance

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