Texas VA Home Loan
If you have served in the military and now want to buy a home in Texas, the VA loan program is worth considering. This program has helped over 20 million veterans buy property and offers many advantages.
Choosing a VA Loan When Buying a Home in Texas
The VA loans program was created to help veterans of the Second World War buy a home. It allows qualifying home buyers to get the property they want with better terms.
Zero Down
Finding the money for a down payment can be difficult, particularly for first-time buyers, but with the VA this isn’t a problem. While you might need 3% with a conventional loan or 3.5% with an FHA loan the VA doesn’t have this requirement.
If you meet the qualifying criteria you can purchase a home without a down payment through the VA loan program.
Competitive Interest Rates
VA loans tend to offer competitive interest rates, similar to conventional and FHA loans. These loans are offered through authorized lenders, and you might find that you get even better rates in some situations.
Less than Perfect Credit
Even if you don’t have a great credit score you might still qualify for a VA loan. If you have a good recent track record with paying bills on time, you could still qualify with lower a credit score. You will need to show that you can keep on top of your debts for the past one to two years.
Lower Closing Costs
When you sign the paperwork to buy your home there are many fees to pay. This can include appraisal fees, title insurance, homeowners insurance, and property taxes, among other expenses. However, the VA limits some of these charges.
Second-Tier Entitlement
The VA will even allow you to buy a second home if you have a clear reason and you have enough entitlement remaining after your first mortgage. This feature is called VA Second-Tier Entitlement.
The VA guarantees 25% of the loan amount, and you need to have this amount of entitlement remaining to get the home you want without a down payment.
The primary basic entitlement is $36,000, if the loan amount is under $144,000. With higher loan amounts the VA loan limits decide your secondary entitlement. In Texas in all counties, the current VA loan limit is $766,550. This means that your current total entitlement is $191,637.
If you already have one VA home loan, your remaining entitlement could allow you to buy a second home with no down payment depending on how much entitlement is left.
If you have previously been foreclosed on a VA loan, the entitlement you used will have to be deducted if you want to buy a new property. The lender might also require you to complete a waiting period before you apply for a new mortgage.
If you don’t have enough entitlement you can still purchase a home as long as you have the money for a down payment. The down payment could still be lower than you would have to pay with a conventional loan, as you only have to pay the difference between the remaining entitlement and 25% of the purchase price.
Qualifying for a VA Loan in Texas
It should be easier to qualify for a VA loan with typically less stringent credit requirements compared to other options, but you will also need to meet eligibility requirements. The home you want to buy also has to meet certain standards for the loan to be approved.
Loan Eligibility in Texas
While the benefits of using a VA loan to buy your home are attractive, it is only available to some people. You should be eligible for a VA loan if you are currently in the military or were previously.
Serving in the National Guard or the Army Reserve for at least 6 years will also count. Students and cadets enrolled in military academies can also qualify. The spouse of a deceased veteran might also qualify.
There are minimum service requirements and your VA Certificate of Eligibility will show your entitlement. The COE is available from the Veterans Affairs office and your lender can get this online.
Eligible Texas Homes
If you meet the requirements set out by the VA, you can use or loan to buy:
- A single-family home
- A condo unit
- A multi-unit property
The VA will allow you to buy up to a four-unit property as long as you live in one of the units. If you want to buy a condominium it has to be within a VA-approved complex.
The VA does not allow you to buy investment properties through this program. You are also not allowed to buy a property that is zoned as commercial.
Property Requirements
If you want to buy one of the above property types in Texas, the VA isn’t going to allow you to buy just any property. They have certain standards that need to be met.
The VA requires that the home is suitable for living and that it is worth the price it is being purchased for. An appraiser is required by the VA to make sure these standards are followed. The minimum property requirements are guidelines that help assess the condition of the home.
As well as making sure the property is a safe place to live, the appraiser’s assessment also protects the lender. It shows that the home is worth the investment that the lender is putting into the home so that they are not overly risking their money.
The appraiser will look at the whole home including the following areas:
- Living space. There should be enough room in the home for living, cooking, dining, and sleeping.
- The property should be accessible from the street, as well as allowing access to the yard and the outside of the home for maintenance.
- The roof. The appraiser will ensure the roof is in good enough condition, not allowing rain in.
- Air conditioning. The home has to have proper air conditioning to prevent health problems.
- Sewage disposal. The home should be connected to a sewage system and the facilities inside must be sanitary.
- Electrical and plumbing systems. Outlets will be checked and problems looked for.
The overall condition of the home will be assessed to make sure that the veteran isn’t buying a money pit.
Income Requirements
You don’t need to be a high-ranking officer to qualify for a VA loan, they are more interested in seeing a consistent income. If you can provide at least 24 months of documented income, that either stays the same or increases over time, this should be good enough.
Your income is also important during the underwriting process when your debt-to-income ratio is calculated. Your lender will not want to see debt account for more than 41% of your gross income when the new mortgage payments are included.
This 41% limit can be exceeded in some circumstances, but the lender might have other requirements. If your debts will be more than 41% of your income, check if your lender will allow you to have a higher DTI.
If, for example, your income is $70,000 or $5,833 per month, your debt cannot be more than $2,391 when potential mortgage payments are included. So if your car payments and student debt total more than this when mortgage payments are included, you might have difficulty qualifying.
Residual Income Protection
The VA wants to ensure that their borrowers do not suffer financial hardship. They do not want to see VA loan borrowers left without much spare money when debts are paid each month.
To avoid this problem, the underwriter will consider the location of the home and the size of the family. This should ensure that the borrower can still pay income taxes and utilities and still have something left over at the end of the month.
This is part of the reason why foreclosures with VA home loans are lower than with other types of mortgage lending.
The VA Funding Fee
While you are not required to pay private mortgage insurance with a VA loan, they do have a funding fee that serves the same purpose. This money is used to guarantee money to the lender should the borrower foreclose.
The funding fee payable depends on the amount of the down payment, and whether it is your first VA loan or not. With a down payment of less than 5%, the funding fee is 2.15% the first time and 3.3% after that.
With a down payment between 5% and below 10%, the funding fee is 1.5%, and 1.25% with higher down payments. The fee is the same whether it is your first VA loan or not, with down payments that are more than 5%.
Summing Up The VA Mortgage For Eligible Texas Veterans and Military Members
If you have served your country, taking advantage of the benefits offered by the VA loan program could be an easier way for you to buy your next home. You can avoid the problem of saving for a down payment and have fewer worries about credit issues when choosing a VA loan.
