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According to the VA, most VA home loans
are approved by the lender using criteria and lending
guidelines set by the VA. In the process of servicing a VA
loan, many people talk of what the VA will approve or won't
approve--most articles written about VA loans even talk of
the VA in terms of the agency approving your individual
loan. In most cases these discussions actually refer to the
rules and established precedents covered by government
regulations. When the VA needs to handle an individual case,
it's usually because the circumstances aren't addressed
clearly by existing rules or the lender requires additional
information. In these cases, the VA does have the final
word. In all others the existing regulations are referred to
for guidance.
VA Purchase Loan Approval Requirements
VA mortgage guidelines require two basic methods to
determine if you qualify for a loan. The first is a look at
your income-called
the residual income method. Can you afford the day-to-day
costs of the VA home loan? Are your debts too large to allow
you to pay for the monthly mortgage payment too? You car
payment and credit card payments plus any other expenses all
factor in to the loan approval process. The second
qualification criteria is a more specific examination of
these issues, boiled down to a formula called the
debt-to-income ratio.
VA Purchase Loan Process
According to the VA, you don't have to submit your credit
information and application until you've found a home you
want to purchase. If you're working out credit problems or
are on the verge of paying off a large debt to reduce your
debt to income ration, waiting until you've found a home to
apply for the VA home loan may work in your favor. But if
you get turned down for the loan because the VA mortgage or
the sale price of the home would be too high, you've wasted
your time going through the motions of trying to buy that
particular home. That's one reason why many people apply for
pre-approval for a VA home loan--you know exactly what your
loan limit will be and you can house hunt more efficiently.
Ask your loan officer about applying for a pre-approved VA
home loan amount. If your credit application is denied,
don't give up-ask
the lender what you need to do to fix your debt-to-income
ratio or credit issues and try again.
The Difference Between a VA Guaranty and a VA Loan
Buying a home for the first time is confusing—there are many
terms to learn, a great deal of paperwork and many little
details. Buying a home with a VA guaranteed home loan is
definitely more buyer-friendly, but if you have never
purchased a home before, there are a few additional terms
and details you’ll need to learn about the VA.
One of the most common misconceptions lenders must dispel
about VA mortgages is where the funds come from. Private
banks issue the actual VA mortgage—no money comes from the
VA itself. The Department of Veterans Affairs comes in on
the veteran’s behalf with a loan guaranty, making the loan
more secure for the lender. The VA promises to pay a
specific amount of the VA mortgage should the veteran go
into foreclosure.
This leads to a second misconception—that the VA issues a
guaranty for the entire loan amount. This isn’t true. The
entire lending industry uses the phrase “VA home loan” as a
blanket term and it’s easy to see why people might think the
VA covers the whole amount on that basis. But in reality,
your VA guaranty covers up to 50 percent of a home loan
amount up to $45 thousand.
The VA also issues a 40 percent guaranty for loans valued
higher than $45 thousand up to $144 thousand. The absolute
maximum the VA will issue in a guaranty is $36 thousand.
That set of figures can be confusing for first-time home
buyers. It’s common to mistake the amount the VA issues as a
loan guaranty—that amount up to a maximum of $36
thousand—for the amount of the loan itself.
The $36 thousand is not the limit of how much you can
borrow. It’s simply the maximum the VA promises to pay the
lender should you default on the loan. Is there a maximum
amount you can borrow on a VA home loan? Yes and no. The VA
does not issue limits, but VA mortgage rules do state that
you can only borrow;
the purchase price of a home
-or-
the appraised value of the home
The VA says you can borrow whichever amount is lower for
that property. Also, banks set a limit on how much they will
lend without a down payment. Once you start learning about
VA home mortgage loans, you’ll soon understand the logic
behind these rules, but don’t be afraid to ask your lender
for clarification if there are issues you still don’t
understand.
Apply now for a VA Purchase loan.
Information source:
www.VAloans.com
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