VA Home Loans for First Time Home Buyers

As defined by Housing and Urban Development (HUD), a first time home buyer is an individual who has not had an ownership interest in a home within the last three years. Some conventional lenders and the Federal Housing Administration (FHA) offer special programs for first time home buyers. There are no VA loan products specifically for first time home buyers, but it is still a viable option because a first time home buyer is able to get an affordable, fixed-rate home loan with little to no down payment. Credit underwriting for these loans is also much less stringent than that of conventional loans, especially now with credit markets being as paralyzed as they are.

VA Still Offers Up to 100% Financing
No-down payment loans are increasingly difficult to obtain with conventional financing. Under recently enacted legislation, VA now uses a locality-based approach in determining ceilings on its no-down payment home loans. VA no-down payment loans are available for as much as $729,000. Larger VA loans may be obtained with relatively small down payments. However, veterans do need money towards closing costs and the earnest money deposit, which the seller generally requires when a sales contract is signed. Last year, about 135,000 veterans, service members and surviving spouses received loans valued at nearly $24 billion. More than 90 percent of VA loans were made without any down payment.

VA-guaranteed home loans are made to eligible veterans, service members, reservists and surviving spouses through private mortgage lenders throughout the United States . Since 1944, when home loan guaranties were first offered with the original GI Bill, VA has guaranteed more than 18 million home loans worth over $965 billion.

Significant Increase in VA Loans
VA is experiencing a significant increase in home loan volume, with more than 162,000 home loan guaranties provided this year, an increase of more than 31 percent over the same period last year.

"VA attributes this increase to the favorable terms traditionally offered with VA loans and the elimination of many no-down payment products in the conventional mortgage market," said Secretary of Veterans Affairs Dr. James B. Peake.

General Income Requirements for a VA Loan
A veteran must verify a minimum of two years employment. If employed by the present employer for less than 2 years, the veteran must verify prior employment plus present employment covering a total of 2 years and provide an explanation of why 2 years employment could not be verified. In addition to that, the veteran's debt to income ratio must not exceed 41%.

The Veterans Administration Loan debt-to-income ratio is a ratio of total monthly debt payments (housing expense, installment debts, etc.) to gross monthly income. A ratio greater than 41 percent requires compensating factors including:

• Sizable down payment;
• The existence of equity in refinancing loans;
• Little or no increase in shelter expense;
• Military benefits;
• Satisfactory homeownership experience;
• High residual income and
• Tax credits for child care

Information Technology Helps Streamline VA Loan Process
Veterans no longer need to obtain a VA Certificate of Eligibility prior to contacting a lender. Lenders can access the program's web portal to use VA's online Automated Certificate of Eligibility (ACE) system and obtain the certificate for the veteran. Many times, lenders can receive the certificate within seconds.

VA lenders have the authority to process and approve veterans' loan applications. Lenders can order appraisals online, review and determine the appraised value of the property themselves, electronically submit the information VA needs to process a loan guaranty, and then receive the guaranty electronically within 24 hours.

VA is also revolutionizing its loan servicing activity through implementation of a new web-enabled and rules-based "smart" system called VALERI (VA Loan Electronic Reporting Interface). Standardized servicing criteria on par or ahead of industry norms and instant access to acquisition and claim payment status make it easier for servicers to work and communicate with VA. It also allows servicers to help veterans who are experiencing financial difficulty avoid foreclosure.