{"id":75907,"date":"2022-09-04T12:02:00","date_gmt":"2022-09-04T18:02:00","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=75907"},"modified":"2024-02-23T16:12:10","modified_gmt":"2024-02-23T23:12:10","slug":"va-home-loan","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/va-home-loan","title":{"rendered":"VA Loans: How Eligibility &#038; Funding Works in 2023"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC9838088569&#038;light=false\" width=\"100%\"><\/iframe>  \n\n\n\n\n<p>As the spouse of an active duty service member, I can honestly tell you that I&nbsp;attribute&nbsp;the humble beginnings of our investing career to the VA loan. The 0% down&nbsp;VA loan allowed us to fund two different houses. Once we were transferred, we&nbsp;rented the house. This was a great way to get into a house with low entrance costs.<\/p>\n\n\n\n<p>While I am no expert in VA loans (let&#8217;s just call me an experienced landlord&nbsp;who has limited funding and likes to exploit every legal resource to fund her&nbsp;empire), I have learned a lot over the years. Since I have seen a lot of questions&nbsp;on the VA loan&nbsp;in&nbsp;the <a href=\"https:\/\/www.biggerpockets.com\/forums\" target=\"_blank\">Forums<\/a>, I wanted to put together this&nbsp;guide based on&nbsp;personal experience and what I have learned over the years. As always, this is&nbsp;only a&nbsp;good starting point and&nbsp;a way to do some preliminary&nbsp;homework before you get started.&nbsp;It does not replace a knowledgeable broker, so make sure you research and find a great broker.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">VA Loan: Who&#8217;s Eligible?<\/h2>\n\n\n\n<p>The first thing to looking into is who is eligible to use the VA loan. The great thing is it&nbsp;extends far beyond current active duty members. The following eight types of people are eligible to use the VA loan:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Veterans<\/li>\n\n\n\n<li>Current or former National Guard or Reserve members who have been activated&nbsp;Federal active service<\/li>\n\n\n\n<li>Active duty service members<\/li>\n\n\n\n<li>Current National Guard or Reserve members who have been Federal active service<\/li>\n\n\n\n<li>Discharged members of the National Guard who have never been activated for&nbsp;Federal active service<\/li>\n\n\n\n<li>Discharged members of the Selected Reserve who have never&nbsp;been activated for&nbsp;Federal active service<\/li>\n\n\n\n<li>Surviving spouses in receipt of DIC (Dependency and Indemnity Compensation)<\/li>\n\n\n\n<li>Surviving spouses not receiving DIC benefits<\/li>\n<\/ol>\n\n\n\n<p><a href=\"http:\/\/www.benefits.va.gov\/homeloans\/purchaseco_eligibility.asp\" target=\"_blank\" rel=\"noreferrer noopener\">This is the link<\/a> to find out more information on whether or not you are eligible.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Types of Purchases a VA Loan Can Fund<\/h2>\n\n\n\n<p>As an investor, I love 0% down loans. Unfortunately, a VA loan, while amazing in the&nbsp;fact that it has no down payment requirements, is&nbsp;very specific regarding what&nbsp;it can be used for. If you or your dependents are unwilling to live in the house,&nbsp;this loan will not work for you. This is a federally sponsored program, and there are&nbsp;very specific requirements to what can be bought with a VA loan.<\/p>\n\n\n\n<p>As defined by the VA, the loan can be used for these&nbsp;five types of homes. As&nbsp;mentioned above, all of these must be your personal home. The specific VA&nbsp;wording <a href=\"http:\/\/www.benefits.va.gov\/homeloans\/purchaseco_eligibility.asp\" target=\"_blank\" rel=\"noopener\">can be found&nbsp;here<\/a>.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Buy a home or condominium unit in a VA-approved project.<\/li>\n\n\n\n<li>Build a home.<\/li>\n\n\n\n<li>Simultaneously purchase and improve a home.<\/li>\n\n\n\n<li>Improve a home by installing energy-related features or making energy efficient improvements.<\/li>\n\n\n\n<li>Buy a manufactured home and\/or lot.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\">A Few Notes on Home Types<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Condominiums<\/h3>\n\n\n\n<p>Personally, I will not buy a condominium. The VA, FHA and&nbsp;other government-approved loans have very specific requirements regarding&nbsp;condominium funding. At one point (not sure if it is still in play), complexes that&nbsp;had more than 30% that were rentals were not eligible for these programs. This&nbsp;causes many areas to lose the ability for future buyers to buy into the complexes.<\/p>\n\n\n\n<p>Once these complexes&nbsp;were no longer eligible to meet these requirement,s these&nbsp;units sat longer and even lost value. To further exacerbate the problem, many&nbsp;condo communities have or create rules regarding the number of rentals allowed,&nbsp;or they forbid it all together. This creates a huge issue regarding an&nbsp;exit plan.<\/p>\n\n\n\n<p>This is why&nbsp;I&nbsp;don\u2019t buy condos and I check all HOAs very closely to make sure&nbsp;there are no&nbsp;laws against making my home a rental once I move out of the area.&nbsp;As an investor my number one protection is the ability to rent my home.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Multiplexes<\/h3>\n\n\n\n<p>The VA allows you to buy a single family, duplex (2 units), triplex (3&nbsp;units) and a fourplex (4 units). The key is that you have to live in one unit, but you are still allowed to rent the other unit(s) out. The great thing is the&nbsp;VA loan will count the income of the other properties when helping you qualify for&nbsp;this property. Therefore, one can oftentimes qualify for a more expensive property.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Defining VA Loan Eligibility<\/h2>\n\n\n\n<p>Now that you know what type of property you want to live in, the key is to figure out&nbsp;how much property the VA loan will allow you to purchase with no down payment.&nbsp;Unfortunately, it\u2019s not as simple as it sounds because it\u2019s based on your location; there is not a&nbsp;universal rule for the entire country. The lowest total amount is $417,000 for a single&nbsp;family. All the numbers after that are based on location and the number of times the&nbsp;loan has been used.<\/p>\n\n\n\n<p>The VA location list to check eligibility can be&nbsp;found <a href=\"https:\/\/www.frommilitarytomillionaire.com\/va-loan-limits-by-county\/\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a>. &nbsp;The key to remember is that the VA eligibility is not your final amount of the loan&nbsp;available. It is simply the amount that you can borrow at 0% down. A lessor known fact is that&nbsp;you can exceed the VA loan; you simply will have to put down a down payment.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Types of Fees Does the VA Loan Entail?<\/h2>\n\n\n\n<p>While there is no PMI in regard to the VA loan, there is a funding fee. This helps&nbsp;cover the costs of the loan&nbsp;and for those who default.&nbsp;The funding fee changes&nbsp;based on the number of properties that you borrowed. The funding fee increases&nbsp;as you increase the number of properties. The funding fee can be rolled into the loan price.<\/p>\n\n\n\n<figure class=\"wp-block-table is-style-regular\"><table><thead><tr><th>Type of Veteran<\/th><th>Down Payment<\/th><th>% First Time Use<\/th><th>% Subsequent Use<\/th><\/tr><\/thead><tbody><tr><td>Regular Military, National Guard, and Reservists<\/td><td>Under 5%<\/td><td>2.30%<\/td><td>3.60%<\/td><\/tr><tr><td><\/td><td>5% &#8211; 9.99%<\/td><td>1.65%<\/td><td>1.65%<\/td><\/tr><tr><td><\/td><td>10%+<\/td><td>1.40%<\/td><td>1.40%<\/td><\/tr><tr><td>Qualifying Disabled Veteran<\/td><td>Under 5%<\/td><td>0%<\/td><td>0%<\/td><\/tr><tr><td><\/td><td>5% &#8211; 9.99%<\/td><td>0%<\/td><td>0%<\/td><\/tr><tr><td><\/td><td>10%+<\/td><td>0%<\/td><td>0%<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\">VA Purchase Loan Fees &#8211; <a href=\"https:\/\/www.va.gov\/housing-assistance\/home-loans\/funding-fee-and-closing-costs\/\" target=\"_blank\" rel=\"noreferrer noopener\">VA.gov<\/a><\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">How to Waive the Funding Fee<\/h2>\n\n\n\n<p>Another lesser known fact is if you have a VA&nbsp;disability rating, then you might&nbsp;qualify for the fee to be waived or reimbursed. There are five groups that can get&nbsp;their funding fee waived.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Veterans receiving VA compensation for service-connected disabilities<\/li>\n\n\n\n<li>Veterans who would be entitled to receive compensation for service-connected&nbsp;disabilities if they did not receive retirement pay<\/li>\n\n\n\n<li>Veterans who are rated by the VA as eligible to receive compensation as a&nbsp;result of pre-discharge disability examination and rating or on the basis of a pre-discharge review of existing medical evidence (including service medical and&nbsp;treatment records) that results in issuance of a memorandum rating<\/li>\n\n\n\n<li>Veterans entitled to receive compensation but who are not presently in receipt&nbsp;because they are on active duty<\/li>\n\n\n\n<li>Surviving spouses of veterans who died in service or from service-connected&nbsp;disabilities (whether or not such surviving spouses are veterans with their own&nbsp;entitlement and whether or not they are using their own entitlement on the&nbsp;loan) &#8212; depending on your house price this could add up to a significant amount of money<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\">3 Ways to Verify Your Exempt Status<\/h2>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Have a properly completed and signed VA Form (26-8937) and a&nbsp;Verification of VA Benefits indicating the borrower\u2019s exempt status.<\/li>\n\n\n\n<li>If you are&nbsp;a veteran who elected service retirement pay instead of VA&nbsp;compensation, you will need a copy of the original VA notification of&nbsp;disability rating and documentation of your&nbsp;service retirement income.<\/li>\n\n\n\n<li>You will need to indicate on the Certificate of Eligibility (COE) that the&nbsp;borrower is entitled as an unmarried surviving spouse.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\">Using the VA Loan to Fund Multiple Loans<\/h2>\n\n\n\n<p>The great thing about the new VA rules is that you are only given a set amount,&nbsp;but you can buy as many houses as you want as long as you don\u2019t exceed your entitlement.&nbsp;The limiting factor&nbsp;isn&#8217;t the number of houses; it&#8217;s the entitlement amount. It is important to&nbsp;remember your entitlement includes the purchase price AND the funding fee&nbsp;(described below) of your location.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">To Figure out Your Entitlement<\/h2>\n\n\n\n<p><em><strong>Equation:<\/strong>&nbsp;Current Location Entitlement&nbsp;\u2013 Previous Entitlement(s) if you have&nbsp;multiple (Funding Fee included) = amount you have left.<\/em><\/p>\n\n\n\n<p>Personally, we have bought two houses with the same loan. Our first house was&nbsp;bought in Virginia Beach. We paid $234,000, and after the funding fee, we had&nbsp;used $239k. We then bought a $163k house in Hanford, CA for $168k after&nbsp;financing. While these are off the top of my head, the point is&nbsp;you can totally buy&nbsp;multiple houses. The key is to make sure you have money left over from the first&nbsp;house so you can use it again.<\/p>\n\n\n\n<p>The great thing with these rules is that&nbsp;you are rewarded for buying cheaper homes.&nbsp;This has worked great for us, as we buy the \u201cworst\u201d house in the best&nbsp;neighborhoods. These of course are the smaller houses typically, but that has&nbsp;also been great, as we have found those have the biggest bang for the buck.<\/p>\n\n\n\n<p><em><strong>Note:<\/strong><\/em> Your entitlement amount is based on your current location, not where you first&nbsp;used the loan. Currently, we have used up a little less than $417,000, so most&nbsp;locations we would move to would not have anything left on the loan. That being&nbsp;said, there are a few places that have a top limit of closer to a million. In one of&nbsp;those locations, we would be able to use the difference (approx. $500,000) to buy another house.<\/p>\n\n\n\n<p>This is great to keep in mind because if you are \u201cout\u201d in one location in regard to&nbsp;your VA loan eligibility, it does not mean you should not have your mortgage&nbsp;broker check your eligibility&nbsp;in the next place you go. It never hurts to ask; you&nbsp;could be missing out on an opportunity!<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How to Finance Above Your VA Loan<\/h2>\n\n\n\n<p>As mentioned above, the VA loan does allow you to finance above your VA loan&nbsp;amount. The key thing to note is anything above the VA funding amount requires&nbsp;a down payment of 25%. So if you go above your funding amount by $10,000, you&nbsp;will now owe a down payment of $2,500. If you need a much&nbsp;higher amount, this can add up quickly.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Note on Why You Might Go Above Your Entitlement<\/h2>\n\n\n\n<p>The last I checked, VA rates were lower than most conventional rates. Depending&nbsp;on the rates for conventional loans, this loan could make sense even with the&nbsp;funding fee. It is important to check all the rates because these change. Even&nbsp;with the funding fee and having a down payment amount, this might have a&nbsp;lower payment than another type of loan, especially if you qualify for the funding fee to be waived.<\/p>\n\n\n\n<p><em>This article has been edited by <a href=\"https:\/\/www.biggerpockets.com\/blog\/contributors\/davidpere\" target=\"_blank\" rel=\"noreferrer noopener\">David Pere<\/a>, a VA loan expert.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>What does VA loan funding entail, and are YOU eligible? Get all the details here and learn the major benefits this loan can offer your real estate business.<\/p>\n","protected":false},"author":1908,"featured_media":144532,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7402,7119],"tags":[],"class_list":["post-75907","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-traditional-loans","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/75907","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/1908"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=75907"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/75907\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/144532"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=75907"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=75907"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=75907"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}