Understanding VA Loans: Funding Fees, Loan Limits, Co-Borrowers & Second VA Loans

VA loans are one of the best mortgage options, offering 0% down financing, no loan limits, and flexible qualification guidelines. However, there are some key details that real estate agents and buyers need to understand when it comes to VA funding fees, co-borrowers, second VA loans, and refinance options. Let’s break it all down.

The VA funding fee is a one-time charge that helps keep the VA loan program running. The fee varies based on the down payment and whether it’s the veteran’s first or subsequent VA loan:

• First-time VA loan with 0% down - 2.15% of the loan amount
• First-time VA loan with 5% down - 1.5%
• First-time VA loan with 10% down - 1.25%
• Subsequent VA loan with 0% down - 3.3%

Veterans who receive VA disability benefits are exempt from paying the funding fee. Additionally, if a veteran pays the funding fee but is later deemed disabled by the VA, they can apply for a refund of the funding fee paid at the time of closing.

No VA Loan Limits - 100% Financing Available

As of 2020, VA loans no longer have loan limits for eligible veterans with full entitlement. This means a qualified veteran can purchase a home for any price with 0% down, as long as they meet income and credit guidelines. However, lenders may impose their own internal limits, so it’s important to work with an experienced VA lender.

VA Condo Approval Requirements

Unlike FHA loans, where detached condos do not need FHA approval, all VA-approved condos must be on the VA-approved condo list - even if the condo is detached. This means buyers and agents should verify the condo’s VA approval status before making an offer. If the condo is not approved, the association may be able to go through the VA approval process, but this can take time.

Qualifying with a Non-Spouse Co-Borrower

VA loans typically require that all borrowers be either the veteran, their spouse, or another eligible veteran. However, if a veteran wants to buy with a non-spouse, non-veteran co-borrower, they must meet these requirements:

• The veteran must occupy the home as their primary residence.
• A down payment of 12.5% is required for the portion of the loan allocated to the non-VA borrower.
• Both borrowers must meet credit and income guidelines.

This is a key consideration for veterans buying with a family member or significant other who is not their legal spouse.

How to Get a Second VA Loan with Partial Entitlement

Many veterans don’t realize they can have more than one VA loan at a time. If a veteran has partial entitlement remaining (due to a prior VA loan that hasn’t been paid off), they can still purchase another home with 0% down - up to the conforming loan limit for their area.

If they exceed the conforming limit, a down payment is required. The formula for determining the required down payment is:

(Purchase Price – Remaining VA Entitlement) x 25% = Required Down Payment

Example: If a veteran has $100,000 of entitlement remaining and wants to buy a $1,000,000 home, they would calculate: ($1,000,000 – $100,000) x 25% = $225,0000 down payment required

VA Loans & High Debt Ratios

One of the most flexible aspects of VA loans is debt-to-income (DTI) ratio approvals. While conventional loans typically limit DTIs to around 45-50%, we have seen VA loans approved at 80% DTI or higher, especially when the veteran has VA disability income or other compensating factors.

All VA Loans Require Owner Occupancy

One of the most essential VA loan requirements is owner occupancy. VA loans cannot be used for investment properties - the borrower must live in the home as their primary residence within 60 days of closing. However, veterans can buy a multi-unit property (up to 4 units) and rent out the other units, as long as they occupy one unit. If they move out they can refinance to another VA Loan, but those rates tend to be a tad higher.

Streamline Refinancing with a VA IRRRL

The VA Interest Rate Reduction Refinance Loan (IRRRL) allows veterans to refinance at a lower rate with minimal paperwork. Key points:

• Available 210 days after the original loan closing
• No appraisal or income verification is required
• Must provide a net tangible benefit (lower payment or better terms)

This is one of the easiest refinance options available and can help veterans save significantly on their monthly payments.

Need Help with a VA Loan? Let’s Get It Done!

VA loans offer incredible benefits, but they require a lender who understands the guidelines, second loan options, and co-borrower rules. If you have a VA buyer or need help structuring a second VA loan, reach out today - we’re here to help get your deals closed!

Please let me know if you have any questions or if a client needs my guidance. I’m just a call, text, or email away.

📞 Cell: 661-714-6258

TEXT: 661-714-6258

📞 Office: 661-260-2970 ext. 2222

📞 Direct Line: 661-291-2222

📧 Email: Mike@AugustaFinancial.com

But wait, there’s more…

Interest Rates

Rates have been flat to slightly higher this week, but nothing is crazy to report. A little financial birdie told me that the banks want rates down in the next 6 months to avoid commercial loans coming due at a very high interest rate and possibly starting a commercial foreclosure market. Most Commercial loans are written with 5, 7, or 10-year balloon payments, and if those loans become due, then it could get ugly. This is a very weird time, so I guess we will wait and see what happens!

• We offer 12-day escrows for pre-approved buyers - Conventional/FHA/Jumbo/Bridge loans.
• We provide loans in all states, so call me with anything you need.
• Government Loans (FHA/VA/USDA) are in the 5’s and very low 6s.
• Conventional loans up to $806,500 are in the low to mid 6s.
• High Balance Loans from $806,501 to $1,209,750 are also in the low to mid 6’s.
• Jumbo loans above $1,209,750 are in the 6’s.
• Bank statement loans are available with 10% down again, with larger down payments in the 6’s.
• Profit and Loss Statement loans require 20% down - no bank statements needed, only a profit and loss statement!
• 0 down loans are available in the high 6s, with a minimum credit score of 620, up to $1,300,000.
• Private Money lenders offer Hard Money Loans with 35% down.
• No Ratio Loans require 30% down.
• DSCR (Debt Service Coverage Ratio) loans are available with as little as 15% down.
• Bridge Loans typically have an interest rate of 7.99% with limited fees, helping you get where you need to go!
• 3/2/1 Buydowns, 2/1 Buydowns, and 1/0 Buydowns are available at great starting rates!

Please note that interest rates are subject to change without notice, and the information above reflects LA County Loan Limits.

**Good News for Condos:**   – NONE!

**Bad News for Condos:** Friendly Valley –  Fannie Mae now denies the entire Friendly complex for critical repairs and deferred maintenance.  Regardless of which of the 13 Friendly Valley Condos it is.

The full state of California naughty list has been added to MikeMeena.com! See the link below:

https://mikemeena.com/non-warrantable-condos/

Let me know if you hear anything new about condos or townhouses.

I am available every day if you need anything.

📞 Cell: 661-714-6258

TEXT: 661-714-6258

📞 Office: 661-260-2970 ext. 2222

📞 Direct Line: 661-291-2222

📧 Email: Mike@AugustaFinancial.com

Have a great day, and an even better tomorrow! Please call me when you have a client who needs to borrow!