Virginia VA Loan Requirements and Guidelines

Virginia VA Home Loan Eligibility Requirements

If you want to buy a home in Virginia and have served in the military, a home loan guaranteed by the VA could be a great choice. A loan from the Department of Veterans Affairs has helped many veterans buy a home with many advantages over conventional and other types of home loans.

Virginia VA Home Loan Benefits

Choosing a VA mortgage offers many advantages. If you have served, it is an option worth consideration if you want better terms on your mortgage.

No Down Payments

If saving for a down payment is a concern that delays your home purchase, the VA removes this requirement. A buyer will be expected to have at least 3% of the purchase price when using a conventional loan, and 3.5% with an FHA loan, but with the VA program a down payment isn’t required.

If you do have money saved, there are some benefits to using a down payment. It could reduce the funding fee and allow the purchase of a more expensive home.

The VA Funding Fee

A borrower using a VA mortgage will have to pay their funding fee. While this seems like a negative, it is paid instead of mortgage insurance and could save veterans a lot of money on their home loan costs.

Private mortgage insurance is paid every month until the borrower has more than 20% equity in the home. The VA funding fee is an upfront charge that can be financed into the loan amount and could be as low as 1.25% of the purchase price.

For first-time VA loan borrowers, the funding fee costs 2.15% with a down payment of 5% or less. For subsequent uses, the cost is 3.3% for low or no down payments. If you have a down payment above 5% but below 10%, the funding fee is 1.5%. The 1.25% fee is available when you have 10% or more for a down payment.

Interest Rates

With all the other advantages, you might not expect the available interest rates to be great. However, the interest rate available with a VA loan is competitive with other options like conventional loans.

Closing Costs

Another expense when buying a home is closing costs. These are fees from appraisers, home inspectors, title companies, mortgage lenders, and more.

If you are buying a home without saving a down payment, you will still have to have the cash to pay these closing costs. However, with a VA loan, there are limits on the fees that can be charged by these professionals.

Approval Requirements

Meeting the requirements to be approved for a mortgage can be tough. The VA makes qualifying for a loan as easy as they can, with lower credit score requirements and more flexible guidelines than conventional mortgages.

Early Payoff Penalties

With some mortgages, you will pay a penalty when you pay off the loan early. Early repayment could save you a considerable amount of money, but if you have to pay a fee for doing this, it won’t be as worthwhile.

The VA prevents lenders from having early payoff penalties. If you decide to sell the home after only a few years or receive an unexpected financial windfall, you won’t be penalized for early repayment.

Second-Tier Entitlement

The VA program allows borrowers to purchase a home even after default as long as they have enough second-tier entitlement remaining. This entitlement also makes it possible to buy a second home if income requirements are met.

VA borrowers who are current on their existing loan can use their remaining entitlement to qualify for a second mortgage with no down payment. The borrower will need a valid reason for purchasing a second home, like a Permanent Change of Station or other changes in family circumstances.

The entitlement isn’t designed to allow borrowers to buy investment properties, though renting out the first property can be acceptable within the guidelines. The income from rent can help with approval, though there will need to be a formal lease agreement to show the lender.

Primary entitlement is $36,000, and secondary entitlement varies depending on your location within Virginia. The total entitlement varies based on the location of the home. In Richmond, Virginia, the entitlement is $191,637.50, which is also the minimum for 2024. 

The entitlement is usually 25% of the loan amount which means that in Richmond and many other counties, the maximum loan amount is $766,550 with zero down. If a borrower purchases a home for less than this amount, they will still have some entitlement left over that could be used to purchase another home.

The VA guarantees the amount of entitlement, which is 25% of the purchase price. Despite the limit on entitlements, there isn’t a maximum loan limit, with the maximum being based on the borrower’s income and debt.

If a borrower wants to purchase another home, after a foreclosure or when they already have a VA loan, the remaining entitlement can be used. If there isn’t enough entitlement remaining, the home can still be purchased if a large enough down payment is provided. The down payment would need to be the difference between the available remaining entitlement and the amount required to purchase the home.

Minimum VA Loan Limit

While there isn’t a fixed limit on the amount that can be borrowed through this program, there is a minimum. The minimum is $144,000, which is covered by the primary entitlement of $36,000.

This minimum helps ensure that the veteran isn’t buying a home that is in a very bad area or is too cheap. If the home doesn’t meet the minimum, the VA will not insure the loan.

Qualifying for a VA-Backed Home Loan in Virginia

Though the benefits of a VA loan are very appealing, it won’t matter if you don’t meet the eligibility requirements.

Minimum Service Requirements

Different categories of veterans and those currently serving have varying minimum length of service requirements. The requirements include:

  • 90 consecutive days in wartime
  • 181 consecutive days in peacetime
  • 6 years in the National Guard or Reserves

The spouse of a service member can also qualify if they died during their service. If you meet the requirements, the DD-214 form can be used to help the lender get your Certificate of Eligibility.

Certificate of Eligibility

The VA can issue a Certificate of Eligibility, or COE, that states the level of service completed by the veteran. This will be required when applying for a VA loan and can be obtained by the lender. While this will show if the borrower is eligible, it doesn’t mean that the loan is guaranteed and the borrower will still have to meet the lender’s requirements.

Debt-to-Income Requirements

When applying to a lender, the borrower’s income and debts will be considered. The lender will want to see a reliable source of income. This income will have to be documented for at least 24 months, staying the same or increasing over that time.

Typically, the lender will expect the borrower’s debt to not be more than 41% of their gross income. The potential new mortgage payments will also be included in this calculation.

For example, if all of the debts, including the new mortgage payment, come to $2,500 per month, the borrower needs to earn at least $73,200 per year, which is $6,100 per month.

Residual Income Protection

When borrowing money to buy a property it is tempting to overstretch your finances to buy a better home. This might leave you without much money to live on after mortgage payments and other bills.

The VA protects the interests of borrowers by calculating how much it will cost to live in the home so that there is enough money left over each month after paying the bills. The amount of money required to be left over depends on the location and the size of the family.

Virginia VA Property Requirements

Before a VA loan can be approved, the home has to be assessed by an appraiser. The home has to meet certain basic requirements, otherwise the mortgage will not be approved.

The VA has these property requirements to protect the borrower. They have been created to ensure the living conditions in the home are adequate and comfortable.

A VA appraisal will be done and will check the main features of the home, checking for problems that could affect the living conditions. They will examine the condition of the plumbing, electrical equipment, foundation, roof, structure, and more to uncover any hidden issues.

If the appraiser does find serious problems, these will need to be fixed before the purchase will be approved by the lender. This might mean negotiations with the seller to make the necessary repairs so that the property is eligible for a VA loan.

Summing Up Buying a Home in Virginia With a VA Loan

If you have served and now want to buy a home in Virginia, the VA loans program is a great option. They will guarantee your mortgage, allowing you to buy a home without a down payment but with a competitive interest rate. The credit requirements can be more forgiving, and there’s even the option to get a second VA loan.

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