Confused about VA loan

[Anonymous]

Hello, all.

I'll be apping later this year for a VA mortgage, so naturally I've been reading these forums. I've come across several threads about VA loans where the person needed X amount in savings. What is the purpose for this if no down payment is required? I just want to be prepared. Here is some general info about me to help determine if I'd need a certain amount in savings:

-100% perm and total disabled vet (my income)

-low DTI, house payment maybe 22-25% of income

-my state of Oklahoma has 0 property tax for 100% vets

-credit will be BARE minimum. All debt paid, but paid derogs remain

TIA!

[polian]

You need to demonstrate that you have the funds to close the loan, i.e. prepaids like a year's homeowners' insurance; title fees, appraisal and inspection costs, etc. Property tax elimination is a great benefit. In IN, it is a ~25K value exemption.

[JVille]

You still need funds for Earnest Money typically $1000 - $2500. Then you need funds to pay for your Home Inspection and closing costs. So you need to have upfront funds. 
sitting down with a VA lender would be a good idea to see how you qualify and exactly what the Potential costs are to you. That is also an excellent time to go over your credit report with a lender and see if there are any items needing to be corrected prior to beginning your home search.

[Anonymous]

Thank you all so much for the input. Yes, I'll definitely sit down with a lender as soon as my CRAs update with debts paid. I have MyFico Premier, so I plan on providing my own scores and reports to avoid a HP (unless he says things look good then I'll just apply).

So...in my situation, what do you think is a sufficient amount in savings for approx 200k house? 3k? 5k?

Thanks again!

[Anonymous]

@AnonymousI just closed on my home today with a VA loan and i had to have 3 months reserves because my DTI was higher than my Lender overlay would allow.  Just start saving now and hae 5k-7k in the bank and you should be just fine!  Talk to @homeloanexpert on here and he can go into detail with lots of info!

[VALoanMaster]

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@Anonymous wrote:

Hello, all.

I'll be apping later this year for a VA mortgage, so naturally I've been reading these forums. I've come across several threads about VA loans where the person needed X amount in savings. What is the purpose for this if no down payment is required? I just want to be prepared. Here is some general info about me to help determine if I'd need a certain amount in savings:

-100% perm and total disabled vet (my income)

-low DTI, house payment maybe 22-25% of income

-my state of Oklahoma has 0 property tax for 100% vets

-credit will be BARE minimum. All debt paid, but paid derogs remain

TIA!

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Hi @Anonymous,

There are very few situations were VA actually requires reserves & they are generally tied to rental properties or multi-units.

There are a few scenarios where a lender will require reserves on a VA loan as an overlay.

The most common one is if your loan has to be manually underwritten, most lenders will require 2 months reserves ( proposed mortgage payment) as a compensating factor.

The other one is COVID19 related in a way. If your debt to income ratio exceeds a certain percentage, a lot of investors will now require reserves. This particular overlay was instituted after COVID19 & the resulting mortgage forbearance program pushed by the government.

[Jdman]

I close on my house tomorrow. I am also a 100% disabled veteran. I am exempt from property taxes but it will still be in your loan and you have to file the paperwork with the county and then provide a letter to your loan servicing provider. I lucked out. We put $3k down, was given the option by the lender to take lender credit for the higher rate. We took the lender credit of $6860 for a 5.25% rate. We are getting a check back for almost $1600 tomorrow. In total we will only pay about $1400 along with the $250 for home inspector. Don't give up! U can do this!