5 Things That Can Hamper Your VA Loan

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A VA loan is one of the best loan options available. Many veterans prefer a VA loan over other types because it can offer reduced interest rates, competitive rates, and flexible underwriting requirements. However, there are also some setbacks that you need to watch for before applying for a VA loan.

5 Things That Can Hamper Your VA Loan

Not Enough Down Payment

This is the most common setback when applying for a VA Loan. The upfront funding fee will usually be too much if you don’t make enough money and don’t have much savings on hand. There are even some guidelines as to how much money you have in your bank account to determine your rate.

For instance, if you only have 50% of your down payment saved up from income or savings, then you are eligible for the maximum funding fee of 3.0%. This seems like a decent amount to cover your down payment but is significantly less than having no savings on hand or not making enough income compared to what you borrowed.

Not Enough Savings After The Purchase

Another setback that could happen when applying for a VA loan is not having any savings or extra income after the purchase is made. VA loan funding fees can be added to your closing costs, and you are only allowed to have so much of those fees on top of your purchase price.

If you did not save up enough for closing costs and lied on a credit app about how much you could get by with, it would negatively end because of this.

Not Enough Income To Qualify

Income is very important when applying for a VA loan due to the fact that there are partial loan guarantee benefits available if your income isn’t high enough. First-time homebuyers, service members who have recently returned from deployment, National Guard members, surviving spouses who lost their partners in military service, and widows of military members who are using the VA loan to purchase a rental property can all get partial loan guarantee benefits if their income level is low enough.

They do this because they want to help those people get into homes, even though they earn less than most buyers would need in order to be approved for financing. So it is very important that you give them actual income information and not just your expected income as that has been known to cause problems.

Not Enough Down Payment

Having at least a 20% down payment may still allow you to get an FHA loan. Still, there are some additional benefits available with VA loans where you put at least 3.5% of the home price in cash, which is money from your savings account or money from a gift from a relative.

As with FHA loans, you can, sometimes, rely on the seller to pay some or all of your closing costs. Again, this is a special benefit of VA loans that you don’t have with conventional mortgages.

No Stable Employment

Employment is considered stable if it has been held for at least two years, and there are no indications that this employment will end within six months. For example, suppose you are self-employed but work for yourself because you have contracts with other companies who have agreed to supply steady income for at least a couple of years.

In that case, that will likely satisfy the requirements for qualifying for a VA loan. On the other hand, working as an independent contractor to balance your hours out through multiple jobs or carry vacation time over from one job to another might not be enough stability to qualify for VA loans in San Diego.

In conclusion, potential VA loan borrowers should not view the requirement of stable employment as a single, insurmountable obstacle. Instead, they should thoroughly explore their options, considering time limitations and other guidelines that the government may impose. If you have some spare time between jobs, keep in mind that your spouse can be used as an asset to help secure a VA home loan.

Furthermore, please be sure to have a VA loan specialist review your credit, income, and other details so that you can be sure your loan application will be processed correctly.

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