VA LOAN QUICK REFERENCE GUIDE

WHAT IS A VA LOAN?
A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs and available to eligible Veterans, Active-Duty Military, National Guard Members, Reservists, and certain surviving spouses.

Best For
✅ Eligible Veterans and Military Members
✅ Buyers Looking for Little to No Down Payment
✅ Borrowers Looking to Avoid Monthly Mortgage Insurance
✅ Buyers Preserving Cash for Emergencies or Improvements
✅ Borrowers with Strong Residual Income

MINIMUM DOWN PAYMENT
Primary Residence

• ✅ 0% Down Payment Available

• ✅ 100% Financing Available Up to County and Entitlement Limits (when applicable)

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• Second Home❌ VA financing is not available for second homes.

• Investment Property ❌ VA financing is not available for investment properties.

• Multi-Unit Properties ✅ 2-4 Unit Properties may be eligible if the Veteran occupies one unit as their primary residence.

Agent Tip: VA buyers can often purchase with no down payment while keeping substantial cash reserves after closing.

MORTGAGE INSURANCE GUIDE
✅ VA loans do not require monthly mortgage insurance (PMI or MIP).
✅ This is one of the largest payment advantages compared to Conventional and FHA financing.
Quick Rule
✅ Eligible VA borrowers can often finance 100% of the purchase price without monthly mortgage insurance.
VA Funding Fee
✅ Most VA loans require a one-time VA Funding Fee.
✅ The funding fee may be financed into the loan amount.
✅ Certain Veterans may be exempt from the funding fee due to service-connected disability status.
Agent Tip
✅ Many Veterans qualify for significantly more buying power because they are not paying monthly mortgage insurance.

CREDIT SCORE GUIDE

• 740+ Excellent borrower profile

• 700-739 Very strong borrower

• 660-699 Strong VA candidate

• 620-659 Common VA borrower range

• Below 620 Review with loan officer

Agent Tip
✅ VA loans are often more forgiving than Conventional financing when credit scores are lower.
✅ Eligibility, residual income, and overall file strength remain important factors.
DEBT-TO-INCOME (DTI) BASICS

What Is DTI?
DTI compares a borrower's monthly debt payments to their gross monthly income.

What Counts?
✅ Car Payments
✅ Student Loans
✅ Credit Cards
✅ Personal Loans
✅ Child Support
✅ Alimony

Usually Does Not Count
❌ Utilities
❌ Cell Phone Bills
❌ Internet
❌ Gym Memberships
❌ Car Insurance

DTI Guidelines
✅ VA financing places significant emphasis on Residual Income in addition to DTI.
✅ Higher DTIs may be allowed when strong residual income and compensating factors are present.
Agent Tip
✅ VA borrowers often qualify when Conventional financing is unable to support the same debt ratios.

SELF-EMPLOYED BUYERS

Common Documentation Required
✅ Personal Tax Returns
✅ Business Tax Returns (if applicable)
✅ Year-to-Date Profit & Loss Statement (when required)
✅ Additional business documentation may be requested
Tax Return Requirements
✅ We will generally request the most recent two years of tax returns for all self-employed borrowers.
✅ In certain situations, we may be able to qualify a borrower using only the most recent year of tax returns if we can document that the business has been operating and filing tax returns for at least five consecutive years and meets applicable underwriting requirements.

Realtor Warning
⚠️ A business owner with $250,000 in gross revenue does not necessarily qualify on $250,000 of income.
✅ Qualifying income is based on tax returns and allowable add-backs, not gross receipts.
Agent Tip
✅ If your buyer is self-employed, involve the loan officer early. Self-employed income calculations can significantly impact buying power.

GIFT FUNDS
Can Buyers Use Gift Funds?
✅ Yes, gift funds are generally allowed from eligible sources.
Common Sources
✅ Parents
✅ Grandparents
✅ Siblings
✅ Immediate Family Members
✅ Other Acceptable Donors (where permitted)

Best Practice
✅ Whenever possible, it is often easier for underwriting when the donor wires gift funds directly to the title company rather than first depositing the funds into the borrower's account.
✅ Direct-to-title transfers can reduce documentation requirements and simplify the paper trail.

Documentation Still Required
✅ Gift Letter
✅ Verification of Donor's Ability to Provide the Gift
✅ Evidence of the Transfer of Funds

Agent Tip
✅ Disclose gift funds early so documentation can be collected before underwriting requests it.

INTERESTED PARTY CONTRIBUTIONS (SELLER CONCESSIONS)
What Are Seller Concessions?
Seller concessions are funds provided by the seller to help cover a buyer's closing costs and prepaid expenses.

Maximum Seller Concessions
✅ There is no standard percentage cap on seller-paid closing costs.
✅ However, VA Seller Concessions are generally limited to 4% of the sales price for certain items classified as concessions.

Seller Contributions Can Typically Be Used For
✅ Closing Costs
✅ Prepaid Taxes
✅ Homeowners Insurance
✅ Lender Fees
✅ Discount Points
✅ Temporary & Permanent Rate Buydowns
✅ VA Funding Fee

Important Notes
✅ VA distinguishes between seller-paid closing costs and seller concessions.
✅ Certain concessions are subject to the 4% limitation.
✅ Always review proposed concessions with the loan officer before writing the contract.

Best Practice
✅ Discuss seller contributions early when structuring offers.
✅ VA loans often provide substantial opportunities to reduce the Veteran's cash-to-close requirements.

DO NOT LET BUYERS
❌ Buy a Vehicle
❌ Open New Credit Cards
❌ Apply for Additional Financing
❌ Change Jobs
❌ Quit Their Job
❌ Deposit Large Amounts of Undocumented Cash
❌ Co-Sign for Someone Else
❌ Miss Payments on Existing Debts