About VA Loans - 100% Financing

Nice houseDo I have to have a down payment with a VA loan?

The VA does not require veterans to have a down payment on a VA mortgage, however, the lender may require a down payment if the VA guarantee is less than 25%. The VA "guarantees" 25% of the mortgage in the event of a foreclosure. The VA uses a formula/worksheet to determine whether the loan will provide a 25% guarantee. Large loan amounts may require a down payment.

Do I have to pay mortgage insurance on a VA loan?

There is no monthly mortgage insurance on a VA loan. There is a funding fee that is paid in full at settlement or financed with the loan. Veterans who are at least 10% disabled are exempt from the funding fee.

Do I need a home inspection for a VA loan?

The VA does not require a home inspection, although, the VA encourages home buyers to obtain a home inspection. The VA appraiser is responsible for determining whether the property meets the VA's minimum property requirements. The appraisal is not a home inspection, but a reasonable evaluation of the home. If the appraiser perceives a problem with the home (i.e. roof, furnace, structural), the appraiser will recommend an examination by a professional.

Do VA loans have a lower interest rate?

VA home loan interest rates tend to be lower than conventional loan rates. The reason is due to the VA backing of the government loan.

Does a seller have to pay closing costs on a VA loan?

Home sellers are not required to pay the veteran’s closing costs (except the pest inspection, in most states). Seller paid closing costs (seller assist), can be negotiated between the veteran and home seller.

How does a VA jumbo loan work?

VA loans that exceed the Fannie Mae conforming loan limit for the county where the home is located are known as jumbo VA loans. Jumbo loans may require a down payment if the loan does not meet the 25% lender guarantee. Use the VA loan calculator to estimate the down payment (if applicable) and loan guarantee.

How much can I afford for a VA home loan?

This is an interesting question, because, the amount a veteran can borrow depends on the borrower's income and monthly debt . . . and the location of the home. The VA requires lenders to use the standard debt to income calculation to determine whether the mortgage payment and monthly debts are 41% (or less) of the monthly gross income. But the Veteran's Administration goes one step further. The lender must also determine whether the veteran will have enough money to pay the utilities and other expenses after settlement. Residual income is the amount of net income remaining (after deduction of debts and obligations and monthly shelter expenses) to cover family living expenses such as food, health care, clothing, and gasoline. Here are the VA residual income tables:

Table of Residual Incomes by Region For loan amounts of $79,999 and below
Family Size Northeast Midwest South West
1$390 $382 $382 $425
2$654 $641 $641 $713
3$788 $772 $772 $859
4$888 $868 $868 $967
5$921 $902 $902 $1,004
over 5 Add $75 for each additional member up to a family of seven.

Table of Residual Incomes by Region For loan amounts of $80,000 and above
Family Size Northeast Midwest South West
1$450 $441 $441 $491
2$755 $738 $738 $823
3$909 $889 $889 $990
4$1,025 $1,003 $1,003 $1,117
5$1,062 $1,039 $1,039 $1,158
over 5 Add $80 for each additional member up to a family of seven

Key to Geographic Regions Used in the Preceding Tables
Northeast Connecticut, Maine, Massachusetts New Hampshire, New Jersey, New York Pennsylvania, Rhode Island, Vermont
Midwest Illinois, Indiana, Iowa, Kansas Michigan, Minnesota, Missouri, Nebraska North Dakota, Ohio, South Dakota, Wisconsin
South Alabama, Arkansas, Delaware, District of Columbia, Florida, Georgia Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma Puerto Rico, South Carolina, Tennessee, Texas, Virginia, West Virginia
West Alaska, Arizona, California, Colorado Hawaii, Idaho, Montana, Nevada New Mexico, Oregon, Utah, Washington, Wyoming

Estimating the maximum loan amount is complicated with VA loans. A good experienced loan officer should be able to determine the maximum loan amount.

How much is pmi on a VA loan?

PMI (private mortgage insurance) is not required on a VA home loan. There is a VA funding fee that is paid in full at closing or financed with the loan.