VA Loan question - In underwriting -

[Anonymous]

I'm looking for some information on a VA Loan that is now in underwriting. We recently took a trip to see family and our last bank statement is a little insane since we drove cross country. I was told that the bank statements would be put under a microscope pretty much and they use it in their loan decision. We've already put money into this home since the house inspections are already in process. Credit history and work history are good but, should I be worried about anything with the statements? Any time anything goes under a microscope it always makes me feel a little nervous (judged). I know we're not to make any other credit inquiries or take out any other kind of loan etc, does this include using one of our credit cards for a purchase? I wasn't sure since it's a revolving line of credit. I just want this process to go smoothly and as planned but reviews and forums haven't made me very comfortable so far. 

First time home buyers - first time VA user.  

[mynameainttracy]

I'm not sure what kind of scrutiny you are expecting but we didn't experience anything like that. We closed on our VA loan 8 weeks ago.

We were told to be prepared to explain any random deposit greater than >25% of our income. They don't want to think you have taken a loan out or something like that. They aren't going to tell you to cancel cable or not eat out so much.

We tried to keep our credit card balances no higher than when we applied.

[Anonymous]

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@Anonymous wrote:

I'm looking for some information on a VA Loan that is now in underwriting. We recently took a trip to see family and our last bank statement is a little insane since we drove cross country. I was told that the bank statements would be put under a microscope pretty much and they use it in their loan decision. We've already put money into this home since the house inspections are already in process. Credit history and work history are good but, should I be worried about anything with the statements? Any time anything goes under a microscope it always makes me feel a little nervous (judged). I know we're not to make any other credit inquiries or take out any other kind of loan etc, does this include using one of our credit cards for a purchase? I wasn't sure since it's a revolving line of credit. I just want this process to go smoothly and as planned but reviews and forums haven't made me very comfortable so far. 

First time home buyers - first time VA user.  

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They will be checking your bank statement for two things - (1) any large, out of the ordinary deposits, and (2) verification of your 3 months reserves (VA loans require that you have 3 months mortgage payments in reserves).

Using a credit card isn't a big deal unless you gained additional debt. A random, small purchase with a credit card here or there isn't going to affect much, especially if you pay off the balance before your statement cuts. They just don't want to see you acquiring new debt or depleting your cash reserves before closing.

[mynameainttracy]

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@Anonymous wrote:

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They will be checking your bank statement for two things - (1) any large, out of the ordinary deposits, and (2) verification of your 3 months reserves (VA loans require that you have 3 months mortgage payments in reserves).

We were never told that. They only verified that we had money to cover closing costs in our savings accounts up front. Maybe because we had enough they never mentioned that. I don't know.

[merc64]

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@mynameainttracy wrote:

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@Anonymous wrote:

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They will be checking your bank statement for two things - (1) any large, out of the ordinary deposits, and (2) verification of your 3 months reserves (VA loans require that you have 3 months mortgage payments in reserves).

We were never told that. They only verified that we had money to cover closing costs in our savings accounts up front. Maybe because we had enough they never mentioned that. I don't know.

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VA loans only require reserves on rental property. 

[Anonymous]

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@merc64 wrote:

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@mynameainttracy wrote:

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@Anonymous wrote:

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They will be checking your bank statement for two things - (1) any large, out of the ordinary deposits, and (2) verification of your 3 months reserves (VA loans require that you have 3 months mortgage payments in reserves).

We were never told that. They only verified that we had money to cover closing costs in our savings accounts up front. Maybe because we had enough they never mentioned that. I don't know.

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VA loans only require reserves on rental property. 

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Sorry - I should have clarified that properly. The VA itself does not require cash reserves on a primary residence; it's generally a lender overlay though. I worked with three different lenders (USAA, Quicken, and Bank of South Carolina, and spoke to several others before making a lender choice) and all of them had overlays of 3 months cash reserves for their VA loan underwriting. I, personally, was not able to find a lender without a cash reserve overlay of 3 months for their VA product. It probably has to do with investor demands because the VA only guarantees up to 25% of the loan or up to $36,000 in most areas; the lender is stuck with the rest - thus the entrance of the lender overlays. In contrast, FHA guantees 100% of the loan, making lenders and investors assume no risk if the buyer defaults, which can often result in fewer lender overlays.

The VA also has an interesting quirk called the residual income test - which is different than DTI. It subtracts your PITI, HOA fees, debt, maintenance, utilities, etc, from your income, then looks at the income that's left. Then based on household size, determines (based on geographic location) how much monthly residual income you require to support a household your size in your geographic area. There are tables that list the residual monthly income requirement by location. So, even if you meet DTI guidelines you may still not qualify if you do not have enough monthly residual income to support the size of your household according to preset VA guidelines.

Also, you cannot use VA entitlement for a rental/investment property - it must be your primary residence and you must sign a verification document that you intend to occupy the residence within 90 days of closing. You can use VA entitlement to purchase a 1-4 unit property if you intend to occupy one of the units and you are free to rent out the other three.

[merc64]

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@Anonymous wrote:

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@merc64 wrote:

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@mynameainttracy wrote:

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@Anonymous wrote:

---

They will be checking your bank statement for two things - (1) any large, out of the ordinary deposits, and (2) verification of your 3 months reserves (VA loans require that you have 3 months mortgage payments in reserves).

We were never told that. They only verified that we had money to cover closing costs in our savings accounts up front. Maybe because we had enough they never mentioned that. I don't know.

---

VA loans only require reserves on rental property. 

---

Sorry - I should have clarified that properly. The VA itself does not require cash reserves on a primary residence; it's generally a lender overlay though. I worked with three different lenders (USAA, Quicken, and Bank of South Carolina, and spoke to several others before making a lender choice) and all of them had overlays of 3 months cash reserves for their VA loan underwriting. I, personally, was not able to find a lender without a cash reserve overlay of 3 months for their VA product. It probably has to do with investor demands because the VA only guarantees up to 25% of the loan or up to $36,000 in most areas; the lender is stuck with the rest - thus the entrance of the lender overlays. In contrast, FHA guantees 100% of the loan, making lenders and investors assume no risk if the buyer defaults, which can often result in fewer lender overlays.

The VA also has an interesting quirk called the residual income test - which is different than DTI. It subtracts your PITI, HOA fees, debt, maintenance, utilities, etc, from your income, then looks at the income that's left. Then based on household size, determines (based on geographic location) how much monthly residual income you require to support a household your size in your geographic area. There are tables that list the residual monthly income requirement by location. So, even if you meet DTI guidelines you may still not qualify if you do not have enough monthly residual income to support the size of your household according to preset VA guidelines.

Also, you cannot use VA entitlement for a rental/investment property - it must be your primary residence and you must sign a verification document that you intend to occupy the residence within 90 days of closing. You can use VA entitlement to purchase a 1-4 unit property if you intend to occupy one of the units and you are free to rent out the other three.

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Interesting you had the experience of 3 months reserves as my experience was totally different. I had no requirement of any reserves (except closing cost of course) and was also having to qualify for two mortgages since wasn't selling old house right away. My lenders were NFCU, VU, and ultimately National Bank of K.C. I'm guessing since the reserve question did not come up for the OP then they will not be required but I would ask my LO just to clarify.