Asheville VA Home Loan
Veteran’s Can Qualify for No Down-payment up to $417,000!
Loans can be assumed by qualified non-veterans or veterans (Sell your home to someone with a loan of 3.5%)
Qualify for a larger loan with a down-payment of only 10%
Reservists/guardsmen who have completed six years of satisfactory duty in any U.S. reserve component, 90 days in a “War Zone”, 181 days of continuous active duty or were discharged before they completed six years due to a disability or reduction in force are eligible for full VA home loan benefits, just like “regular veterans”.
VA Buyer Qualifications
CREDIT: Veterans must verify two years of satisfactory credit history. However, the VA is very liberal on this point and will usually allow a veteran who has not established credit to indicate by letter that he prefers the use of cash.
EMPLOYMENT: A veteran must be able to verify two years of satisfactory employment. If he was in the service or in school, that time will normally count toward the requirement.
BANKRUPTCY: The VA will generally disregard bankruptcy after 5 years if credit has been re-established. If the bankruptcy occurred less than 5 years ago and the veteran had a reason which was beyond his control, then they will consider each case individually. If the bankruptcy was discharged less than two years ago the time frame is not considered to be long enough to re-establish a credit standing.
MONTHLY DEBT PAYMENT: The VA may count all monthly obligations against the buyer, but If they are less than 6 months in duration they might not count against the applicant. Also, the VA uses only the minimum monthly payment required on revolving accounts.
CASH REQUIRED: A veteran must be able to verify that he has enough cash to pay any downpayment and closing costs before being submitted for VA approval. The seller may pay all of the veteran’s closing costs and prepaids. (Limited to 4% of appraisal in some areas.) Therefore, it is possible for a veteran to buy a home with almost no cash required.
GIFT LETTERS: Gift letters from relatives are acceptable, but they must state what the gift is intended for, the amount, the donor’s relationship to the veteran and that the money is a gift and need not be repaid.
CHILD SUPPORT: Child support received by the veteran or veteran’s spouse will usually count toward income, but it is necessary to prove receipt of this income (payment through the court or cancelled checks).
RENTAL INCOME: Rental income may count if the buyer has a lease agreement or a statement from a tenant verifying the payment. Caution: Figure only 80% of net rental income since VA makes allowances for vacancy, taxes and maintenance.
CO-BORROWERS: Two veterans may purchase a home together and the eligibility could be split between them or all of one veteran’s eligibility could be used if preferred. Both incomes would count toward qualification in these cases. A veteran and a non-veteran may purchase together on a VA loan but the loan guarantee to the lender will be reduced, as the VA will not guarantee the non-veteran’s share of the loan. Caution: In most cases the lender will not make this type of loan because they are unable to sell such a loan to investors due to the decreased loan guarantee. Some VA offices allow co-signers but the co-signer must be very well qualified and they would not have any ownership, only liability.
UNITS & ACREAGE: One to four family unit structures are acceptable as long as they are attached and the veteran occupies one of the units. Any amount of acreage is allowed, and farms are eligible if the veteran intends to occupy the house on the farm.
SPECIFICATIONS: Property should have modern plumbing, electrical and heating systems. Homes near commercial property, railroads, incinerators or airports may be excluded. The VA does not usually make too many requirements unless the structure is unsound or there is an obvious danger or hazard such as inadequate foundation, roof or furnace. They require health authority approval of septic systems and a termite inspection. If the vet accepts responsibility the VA will occasionally waive some repair requirements.
APPRAISALS: VA appraisals are good for 6 months, no extension is allowed. If a contract is dated prior to the
expiration date of the appraisal the VA will still honor it.
VA Financing – Advantages and Disadvantages
LOW CASH OUTLAY: Veteran buyers who have not previously used their home loan benefits may obtain loans
up to $417,000 with nothing down. They may purchase homes greater than $417,000 by making down
payments on top of the $417,000 VA loan. Some lenders only require 25% down on the sale price over
$417,000. The seller or builder may pay the veteran’s closing costs or prepaid Items. This feature makes it
possible to purchase homes with no out of pocket cash outlay. Lenders may also pay the veterans closing
costs and pre-paid items, in exchange for higher interest rates.
LIBERAL QUALIFYING FORMULA: The Veterans Administration does not use a gross income/formula like FHA or
Conventional lenders. They use a liberal debt ratio and a residual income formula. In addition, they do not
require minimum credit scores like most conventional lenders. As a result, most veterans qualify for higher loan
amounts than they would under FHA or Conventional guidelines. Veterans who are willing to make some down
payment are given more liberal qualifications, due to a reduced foreclosure rate.
VA LOANS ARE ASSUMABLE AT THE SAME INTEREST RATE: VA loans may be assumed at the original interest rate.
Loans dated before March 1, 1988 can be assumed without any loan qualification. Loans dated March 1, 1988
and after require qualification to assume, but may be assumed by veterans or non-veterans, occupants or non-
occupants, at the original interest rate. The fully assumable non-qualifying loans made before March 1, 1988
are extremely valuable, as the seller can use various creative financing techniques to sell these properties, does
not have to pay discount points, worry about a low appraisal, appraisal requirements or the buyer being
approved for a loan. A fully assumable non-qualifying VA loan can close in days instead of weeks or months.
VA loans made after March 1, 1988 may be sold without qualification, on installment sales without VA or the
lender’s permission, as long as the title does not change hands and the veteran remains liable. (See VA
CREATIVELY FINANCED: Since no “Due on Sale” clause was written into VA loans prior to March 1, 1988, these
existing VA loans can be sold under lease purchase agreements, contract for deed or wrap-around financing.
The seller is also free to carry second or even third mortgages on top of the original VA first mortgage. VA loans
made after March 1, 1988 may be sold quickly, without loan qualification using installment sales, (see VA
USE OF PARTIAL ELIGIBILITY: (YOU CAN USE YOUR ELIBILITY AS MANY TIMES AS YOU WANT AFTER REPAYING A PREVIOUS VA LOAN) Veterans may use remaining partial eligibility to purchase homes. That is, if the veteran has only used part of his eligibility, he is free to use the remaining amount or any increases granted retroactively to all veterans as the VA loan guaranty increases. Once the original VA loan has been satisfactorily paid off, that portion of the eligibility is restored to be used again. Veterans who have paid off
their VA loan, but have not sold the property can request a one-time reinstatement of their eligibility on that property to use again.
SOME SELLERS FEAR VA APPRAISALS: In some areas of the U.S., sellers are reluctant to sell their homes with VA
financing because they fear they will receive low appraisals or be required to make many repairs, both of
which could reduce their proceeds check. This fear stems from the days when VA appraisers were “staff”
appraisers working directly for the Veterans Administration and thought they were protecting the veterans by
requiring numerous repairs or appraising the house for less than the selling price. This problem has been virtually
eliminated as VA now uses “fee appraisers” rather than staff appraisers, and most VA appraisals have few or no
required repairs. The time frame to obtain a VA appraisal is roughly the same as conventional appraisals.
LOAN PROCESSING TIME: The time to process a VA loan traditionally has been longer than on Conventional
loans. However, VA automatic approvals have cut this processing time to an average of 4-6 weeks for loan
closing and some loans close in 2-4 weeks. Making sure the veteran has his Certificate of Eligibility before going
to loan application can save several weeks. Many veterans are now getting formal loan approval, before
making an offer. This eliminates loan rejection, speeds the time frame to close and is similar to making a “cash”
offer. Sellers are more likely to accept offers when the vet buyer is pre-approved for the loan.
VA Eligibility Problems and Solutions for Loans Made Before 3/ 1/88
PROBLEM 1: A veteran has never used his VA loan benefits and has $27,500 of eligibility available. He wants to
purchase a $125,000 home using his VA entitlement. How much of a VA loan can he obtain and how much
downpayment will be required?
SOLUTION: Most lenders will lend up to 4 times the veteran’s eligibility with no downpayment requirement. 4 x
27,500 = $110,000, so $110,000 is the maximum this veteran could borrow with no downpayment. When the loan amount requested exceeds 4 times the veteran’s entitlement, most lenders require a downpayment of 25% of the balance of the price. So, in this case $125,000-$110,000 = $15,000, and then 25% x $15,000 = $3,750 downpayment required, and the veteran could receive a VA loan in the amount of $121,250. Note: Most lenders would only loan up to $135,000 maximum VA loan in conjunction with a downpayment, until after
PROBLEM 2: A veteran used his VA home loan benefit in May 1976 and received a VA loan of $25,000 at that
time. In June 1978, he allowed a non-veteran to assume his VA loan. Now he wishes to buy a $70,000 home
using his VA benefits again. Can he do so? If yes, will he be required to make a downpayment?
SOLUTION: By checking the date his previous loan was made against the dates the Veterans Administration
increased all veterans’ eligibility, we see that he has had two increases in eligibility; October 1, 1978 and
October 1, 1980. Those increases were for $7,500 and $2,500, respectively. Therefore, we know that this veteran
has at least $10,000 of partial eligibility available. (95% of all veterans have at least $10,000 entitlement
available.) In addition, we should check the guaranty rule to see if this vet had used up all his eligibility on the
$25,000 purchase back in 1976. If we multiply the $25,000 times 60%, which is the maximum amount the
Veteran’s Administration guarantees on any VA loan, we will find that only $15,000 of the veteran’s entitlement
was utilized on that 1976 loan. By referring again to the dates of eligibility increases, we can see that this
veteran had $17,500 entitlement in May 1976. He used $15,000 on the loan, leaving $2,500 remaining partial
eligibility. When we add $2.500 to the $10,000 the veteran has received in increases since that time, we see
that he now has a total of $12,500 of usable eligibility.
Most lenders would lend 4 times the $12,500 with no downpayment requirement, or $50,000 in this case. He will
be required to put down 25% of the portion of the sale price, which exceeds $50,000. $70,000-$50,000 = $20,000
= $5,000 downpayment required on the purchase of the $70,000 home. The veteran can obtain a $65,000 VA
loan in this case.
PROBLEM 3: A veteran has a home for sale in May 1987, listed at $75,000 with a $50,000 VA loan on it that he
obtained in April 1977. If he allowed a non-veteran to assume this loan at the listed price of $75,000 would he
be able to purchase a new $120,000 home using VA loan benefits? If so, will a downpayment be required?
SOLUTION: If the veteran receives $25,000 cash, less closing costs on an assumption sale to a non-veteran, he
could utilize his partial eligibility of $10,000 (as we demonstrated in Problem 2 above, he would have additional
eligibility due to increases in 1978 & 1980) and purchase the $120,000 home with a new VA loan. Once again
we see that while 4 times the remaining eligibility is all he may borrow with no downpayment required, in this
case it would be $40,000. But in conjunction with a downpayment the veteran could use his entitlement in this
way: $120,000 less $40,000 = $80,000. his downpayment requirement is 25% of $80.000, or $20,000. So this
veteran could obtain another VA loan for $100,000, putting $20,000 of his proceeds towards the downpayment.
PROBLEM 4: A veteran purchased a home appraised at $100,000 in January 1982 and obtained a VA loan for
$100,000. If he allows a non-veteran to assume his loan in 1987 and obtained a release of liability from the
Veterans Administration, could he obtain another VA loan in 1987 for $100,000?
SOLUTION: This veteran will not be eligible for any further VA loans until this loan is paid in full, the VA increases
the entitlement, or another veteran substitutes his eligibility for the original vet’s eligibility. The release of liability
obtained only protects the veteran from financial obligation or responsibility in the event the person who
assumed the loan does not make the payments. It does not return his eligibility and it will remain used until the
loan is paid in full.