VA Loans and Income Verification
VA Loans and Income Verification: Guard and Reserve Pay
VA home loans require income verification as part of the loan approval process. One reason for this is so the lender can calculate the borrower's debt-to-income ratio using income that has been shown to be reliable and "likely to continue" as the VA loan rulebook puts it.
Qualified VA loan applicants in the National Guard or the Reserves would naturally want to include their income from military service as part of their VA loan application, but does the VA recognize Guard or Reserve pay unconditionally?
VA Loan Purchase Agreements–An Important Fact
There are many steps to a VA guaranteed home loan, and it's easy for a first-time home buyer to get confused or overlook important aspects of the VA loan process. It's easy to forget about some of the home buyer's rights under the VA loan program when navigating the process as a new house hunter, but there's one thing a borrower should always remember about one particular feature of VA loans: the escape clause.
We've covered the VA loans escape clause in previous blog posts, but basically it is protection for the buyer. The VA loan escape clause does not allow a borrower to be penalized for backing out of a VA home loan deal because the sale price winds up being more than the appraised value of the home.
VA Loan Reader Question: Am I Obligated To Sell My Home?
A reader asks, "If I'm the seller, and the VA value after the appraisal is lower than what I'm asking, do I have any right to refuse the sale with this buyer or not? What options do I have if I want to cancel the sale at this moment? The VA just appraised my house last Tuesday."
VA loan requirements stipulate that the following "escape clause" be added to a commitment to purchase:
“It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise or be obligated to complete the purchase of the property described herein, if the contract purchase price or cost exceeds the reasonable value of the property established by the Department of Veterans Affairs.”
VA Loan Reader Questions: Minimum Property Requirements
A reader asks, "I applied for a VA loan and the appraisal was done. The appraisal came back higher than the loan ($30,000 higher), but the lender says I have to make minor repairs to my house before I can proceed with the loan. My question is why do I have to make these repairs when the VA makes loans for home renovations ?"
An entire chapter of the VA Lender's Handbook is dedicated to what the Department of Veterans Affairs calls Minimum Property Requirements. These requirements are listed to help VA appraisers know what homes should be approved for VA guaranteed mortgages as-is, which need corrections or repairs before the loan can be approved, and which homes should not be considered for VA mortgages.
VA Loan Occupancy Requirements
A reader asks, "If I purchased a home utilizing my VA benefits and for some reason I cannot occupy this home as required by law, what is the penalty or fine if any will be levied against me?"
As a condition of loan approval, VA rules require a borrower to certify in a legally binding document that he or she will occupy the home within a reasonable period (usually 60 days) following the closing of the loan. For married borrowers, the spouse can move into the home and fulfill the occupancy requirement. Borrowers who know ahead of time they cannot or will not occupy the home right away have two basic choices--make arrangements with the lender and VA, or do not close the deal on the loan.
VA Loans: What Happens If the Borrower Dies?
A reader asks, "What happens to a VA loan when the veteran dies and the spouse is not on the loan?" The Department of Veterans Affairs official site addresses this question directly in a section called Post-Loan Frequently Asked Questions. According to the VA, this is common enough question to warrant inclusion in its FAQ:
"Q: If a veteran dies before the loan is paid off, will the VA guaranty pay off the balance of the loan?
VA Loans and Ineligible Properties
We encourage readers to ask questions about VA home loans in the comments section--every week we receive many questions about the details of VA guaranteed home loans including queries about which types of properties are or are not eligible for a VA mortgage loan.
One common question is about the possibility of a VA mortgage for a boat. Unfortunately, VA loans aren't available for boats as they don't have a permanent foundation and can't be classified as "real property". Other people want to know if a certain type of home or homes in a certain condition are eligible.