The VA Home Loan Program is an incredible option for active duty military personnel and veterans. For all the commonly known features of this amazing program, some of the best features go unnoticed. Here are a few of them!
1. VA loans permit a non-veteran co-signer who isn’t your spouse!
Yes, it’s true! You don’t have to go get a quick marriage license or establish common-law marriage to be eligible for a VA loan. You can apply for a VA Joint Loan, and it’s a great option that many lenders aren’t aware of! There are some extra requirements, such as a minimum 12.5% down payment being necessary, the co-signer must live in the property, and prior approval from VA is required. This is because the VA is guaranteeing 25% of the veteran’s half of the loan, while the co-signer is responsible for qualifying for the other half of the loan.
This means the veteran will use a smaller amount of his or her entitlement, and even better, it means the VA Funding Fee will be HALF of what it would normally be. For example, with a 12.5% down payment, the standard VA Funding Fee changes from 1.25% to .625%. If the veteran has a 10% or higher disability rating from the VA, the Funding Fee is still waived as usual. This can be a great option for buyers who are not married and don’t have 20% to put down to avoid PMI on a conventional loan, but one of them is eligible for VA financing.
2. VA retirement income and disability income is tax free, so lenders can increase it on your application by up to 25% to help you qualify for your loan!
When your base debt to income ratio is above 41%, lenders can “gross up” your tax-free income by up to 25% (depending on your tax bracket) to help you qualify. This is standard for non-taxable income on your active duty LES, but it also applies to non-taxable income after you separate. Educational benefits are not considered to be qualifying income and are not eligible for gross-up calculations. Your retirement and disability benefits will show on your Certificate of Eligibility.
3. For active duty military borrowers, there is no minimum amount of time the borrower must be on active duty to be eligible for a VA mortgage!
There’s a pervasive misconception that the borrower must be on active duty for at least 6 months, but in reality, if the borrower has a valid Certificate of Eligibility showing full entitlement is available, that borrower is eligible for a VA mortgage. This means the active duty service member is not forced to rent at his or her first duty station, and can take advantage of purchasing a home when they transfer instead of renting and waiting, as interest rates and home sales prices continue to rise.
Would you like to know more?
Every loan application is unique, as is each individual’s personal circumstances. You should always consult with local, experienced, and trusted loan officer to explore your VA loan options. Front Range Heroes is a great place to start. Let’s chat!