VA Loan Entitlement Question

[delige]

I purchased a home in 2006 and used my VA loan. The loan amount was $410, 895 and I ended up getting approved for a short sale ($267K roughly) 3 years later after I was laid off. Obviously the VA took a loss. I received a letter from the VA that states they can't restore the entitlement I previously used but my COE shows my remaining Loan Guaranty Entitlement. This is where I'm getting confused about what I have left to use as this is what my COE indicates:

This Veteran's Basic Entitlement is $0

Total Entitlement Charged to Previous VA Loans is $102, 723

If anyone is familiar with VA loans, does this mean I can still use a VA loan or would it be best to try for an FHA? I'm looking to purchase a house between $300K to $360K by the end of next year. I started working on my credit back in March and managed to get my FICO scores from the low 500s to the low 600s. I've gotten some secured credit cards and have 1 collection to pay off. I'm hoping I can get my mortgage scores up to 660 over the next year. Any guidance would be greatly appreciated!

[VALoanMaster]

Unless you’re in a high cost area, you only have about $10,000 of entitlement left which equals about $40,000 in terms of a new loan.

That makes FHA pretty much your only option.

[Anonymous]

FHA if you don’t have 25% of the shortage of entitlement needed, or if you have about $65,000 you can put down you can still use VA and avoid PMI with the better VA rates vs conventional with a 620-660 score. VA rates are typically better with low score than conventional rates are.

[delige]

My middle mortgage score is 649. I was going to pull the trigger on applying for an FHA mortgage in the next month or so since my VA loan is pretty much dried up. However, my boyfriend hasn't used his VA loan yet but his credit scores are much lower than mine. I would prefer to combine our VA loans insted of doing an FHA (I think we can do that). Here is where he currently is...

Mortgage Scores:

522, 546, 581

Collections: 

First Choice Emergency Room - $1196 - 11/2017

First Choice Emergeny Room - $1353 - 03/2017

First Choice Emergency Room - $1196 - 02/2018

Signal Hill - $792 - 12/2014 (aparment early lease termination)

Hyde Park - $2013 - 02/2018(apartment early lease termination)

He also has about 6 negative items in his tradelines. 

My first question is can he qualify for a VA loan with a middle score of 546? My second question is should he pay off the collections first before even thinking about using his VA loan? Lastly, can you refinance later down the line from an FHA to a VA? Wouldn't that be beneficial to eliminate the PMI?

[VALoanMaster]

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@delige wrote:

My middle mortgage score is 649. I was going to pull the trigger on applying for an FHA mortgage in the next month or so since my VA loan is pretty much dried up. However, my boyfriend hasn't used his VA loan yet but his credit scores are much lower than mine. I would prefer to combine our VA loans insted of doing an FHA (I think we can do that). Here is where he currently is...

Mortgage Scores:

522, 546, 581

Collections: 

First Choice Emergency Room - $1196 - 11/2017

First Choice Emergeny Room - $1353 - 03/2017

First Choice Emergency Room - $1196 - 02/2018

Signal Hill - $792 - 12/2014 (aparment early lease termination)

Hyde Park - $2013 - 02/2018(apartment early lease termination)

He also has about 6 negative items in his tradelines. 

My first question is can he qualify for a VA loan with a middle score of 546? My second question is should he pay off the collections first before even thinking about using his VA loan? Lastly, can you refinance later down the line from an FHA to a VA? Wouldn't that be beneficial to eliminate the PMI?

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Hi Delige,

I recommend that you work with a lender who will help you raise your boyfriend's credit scores. Most lenders want a 580+ mid score for VA. There are few lenders that say they go down to a 500 score but the number of people that actually get approved is really low.

Yes you can "combine" your VA entitlement but that is a longer process because VA has to approve the file before the lender does. In addition to that you probably don't have enough entitlement left to cover your part.

There is really no reason to go that route since your boyfriend has his full entitlement. 

Do not do anything on your bf's credit until a lender has looked at it & given you a plan of action.

Yes, you can refinance from FHA to VA down the road but there are a couple of problems with that in my opinion.

1)Every time you refinance you add closing costs on your loan. That number could be anywhere from $3,000 to $7,000 depending on your taxes, insurance & location.

2) You need to have enough equity in your home to cover the closing costs & there is no guarantee that you will especially since you're really only putting 1.75% down on an FHA loan.

3) There is no telling where rates will be when you're ready to refinance but the general consensus is they are only going to continue going up. You may lower your payment by getting rid of the mortgage insurance but your rate is probably going to be higher.

Does that make sense?

[LakeLife]

I'm not sure this statement is entirely true (but I recognize you're the expert in this situation, so I could be either off or pointing out something you weren't sure about).  Wouldn't they have to be married?  Just to have my wife on my VA loan as a co-signer (we were engaged at the begining of the process) we had to get married before closing.  

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@VALoanMaster wrote:

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Yes you can "combine" your VA entitlement but that is a longer process because VA has to approve the file before the lender does. In addition to that you probably don't have enough entitlement left to cover your part.

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[VALoanMaster]

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@LakeLife wrote:

I'm not sure this statement is entirely true (but I recognize you're the expert in this situation, so I could be either off or pointing out something you weren't sure about).  Wouldn't they have to be married?  Just to have my wife on my VA loan as a co-signer (we were engaged at the begining of the process) we had to get married before closing.  

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@VALoanMaster wrote:

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Yes you can "combine" your VA entitlement but that is a longer process because VA has to approve the file before the lender does. In addition to that you probably don't have enough entitlement left to cover your part.

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This is a little bit different because they are both Veterans so they each have entitlement that can be used. 

On a typical VA loan where there is one Veteran on the loan, the VA will cover 25% of the loan amount in the event of a loss to the lender.

So on a $200,000 loan amount, 25% would be $50,000. That means $50,000 of your available entitlement will be tied up on this house.

Here's an example of a "joint" VA loan: Let's say you and another a Veteran want to buy a home jointly but you're not married.

Now let's say the price of the home is $200,000.

In the scenario where we have 2 Veterans, who are not married, the VA will basically split the loan in half in terms of how much of each Veteran's entitlement will be used. So $200,000 /2 = $100,000 each X 25%= $25,000 of each parties available entitlement.

Also, on a side note, you technically do not have to be married to be on the mortgage.

[LakeLife]

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@VALoanMaster wrote:

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@LakeLife wrote:

I'm not sure this statement is entirely true (but I recognize you're the expert in this situation, so I could be either off or pointing out something you weren't sure about).  Wouldn't they have to be married?  Just to have my wife on my VA loan as a co-signer (we were engaged at the begining of the process) we had to get married before closing.  

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@VALoanMaster wrote:

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Yes you can "combine" your VA entitlement but that is a longer process because VA has to approve the file before the lender does. In addition to that you probably don't have enough entitlement left to cover your part.

---

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This is a little bit different because they are both Veterans so they each have entitlement that can be used. 

On a typical VA loan where there is one Veteran on the loan, the VA will cover 25% of the loan amount in the event of a loss to the lender.

So on a $200,000 loan amount, 25% would be $50,000. That means $50,000 of your available entitlement will be tied up on this house.

Here's an example of a "joint" VA loan: Let's say you and another a Veteran want to buy a home jointly but you're not married.

Now let's say the price of the home is $200,000.

In the scenario where we have 2 Veterans, who are not married, the VA will basically split the loan in half in terms of how much of each Veteran's entitlement will be used. So $200,000 /2 = $100,000 each X 25%= $25,000 of each parties available entitlement.

Also, on a side note, you technically do not have to be married to be on the mortgage.

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Great, thanks for clearing that up for me!

[VALoanMaster]

you're welcome