VA Loans-Phoenix, AZ

Serving in the military in some capacity, or being married to someone who has, is one of the main requirements for VA buyers. But there are specific circumstances that are necessary for this type of loan program.

• You have done 181 days of active service during peacetime

• You have done 90 consecutive days of active service during the war

• You have served more than six years as National Guard personnel or Reserves

• You are an active spouse of a service member who died in the line of duty or due to a disability connected to the service.

Not all qualified veterans will meet these standards, but they might still be able to acquire a VA mortgage depending on their discharge status. You could still be eligible for VA loans if:

• Your discharging was due to hardship, convenience for the government, or reduction in force

• The discharging was due to a medical condition or service-related disability

• You were discharged for early out and served a minimum of 21 months of a two-year enlistment

Even if you meet these requirements, you are not guaranteed to qualify for a VA loan, as other factors will come into play.

There are also some separate programs that could be possible for eligible Native American veterans. Just ask your lender about the available options for VA loans.

The type of property you plan to buy and where it is can also affect your ability to obtain a VA loan. First, the house must become your primary residence, and it must be occupied within 60 days of the loan being approved. Also, the property in question cannot be a vacation home, seasonal home, or real estate investment property.

An appraisal of the property must also determine that the estimated value is a fair one for the amount of the VA loan. Understand that the median sale price for a Phoenix home is currently around $440,000.

Personal finances play a huge role in being approved for any type of loan, let alone a VA mortgage. Private lenders will want to confirm that you are not a risky borrower and that you have the funds to finance this purchase and pay back the VA loan. There are a few data points that will confirm to the lender your ability to pay what is owed.

Credit Score

Your credit history is an indication of how reliable you are at paying back the money that you owe. It includes other loan payments, credit cards, and the length of certain accounts. A strong credit score usually gives you access to more competitive interest rates. Though the VA does not list a credit score requirement for VA loans, many lenders would prefer to see a score above 580 to consider you a less risky borrower.

Debt-to-Income Ratio

DTI measures the amount of debt compared to the amount of income every month. The higher the DTI, the more risky it may be to lend you money for a VA loan. Eligible veterans, active-duty service members, and surviving spouses will have to provide documentation to the lender proving that they have the cash to afford a monthly payment toward VA loans. Providing this information may involve bank statements, tax returns, pay stubs, and more. Typically, lenders will look for a maximum DTI of 41% to consider active-duty military personnel, veterans, and surviving spouses for VA loans.

A down payment is not the only consideration when closing a deal on a home. Closing costs include any fees that are involved in the real estate transaction. Some examples include attorney fees, realtor fees, title search costs, and property transfer requests.

There is also a closing cost specifically associated with VA loans called the VA funding fee. VA loans work partially because this fee helps to finance other loans when military service borrowers pay it as part of their closing costs.

The most important document that you will need to move through the VA loan process is a certificate of eligibility. Essentially, this document states that you meet the requirements of an eligible veteran, active-duty service member, or surviving spouse.

Obtaining your certificate of eligibility is relatively simple and can be done so online or through a VA-approved lender. You can also start the VA loan application while your certificate is in the processing stage so that you do not have to wait.

The VA entitlement refers to the amount of money that you can borrow without having to include a down payment. A full entitlement means that there is no maximum amount. Plus, if you are purchasing your second home and already have a VA loan for the previous property, then what’s left of the entitlement will play a role in your next mortgage.

VA Loan Limit

The entitlement affects the VA loan limit directly. A full entitlement means that the borrower can obtain a VA loan with no maximum limit that will require a down payment. At District Lending, the maximum VA loan amount that can be approved for qualified veterans, service members, and spouses with a full entitlement is $2,000,000. The current VA loan limit for all Arizona counties, including Maricopa, is $726,200 as of January 2023.

As mentioned previously, being qualified for a VA loan gives you access to lower interest rates. You can lock in a fixed-rate mortgage to keep the interest the same for the whole loan term or you can consider an adjustable-rate mortgage. Either way, the more veterans and active-duty service members that take advantage of these lower rates, the more people who have served the country will be able to afford new homes.

As a side note, better interest rates can also be accessed with a refinance. VA loans are the only loans with guaranteed 100% conversion of equity into cash. That means when you refinance, you can access more resources as veterans, active-duty service members, or surviving spouses that want a VA streamline refinance loan.