Below are some of the questions that we are asked about VA Loans. If you can't find an answer to your particular question or you have specific scenario you have questions about, feel free to text me at 719.200.1171. I'm always happy to answer questions.
This is one of the most common surprises for VA-eligible buyers, and it's worth clearing up early.
Yes, a VA loan allows you to purchase a home with zero down payment in most cases, but that doesn't mean zero out of pocket. Closing costs are separate from the down payment, and they're real. In Colorado Springs, closing costs on a VA loan typically run between 2% and 4% of the purchase price depending on the loan amount, lender fees, title costs, and prepaid items like homeowner's insurance and property taxes.
The good news is that in the current market, and in most balanced markets, there are two strong strategies for covering those costs.
Seller Credits In most transactions, we can negotiate a seller credit of 2.5% to 3.5% of the purchase price to cover closing costs. This means the seller essentially pays your closing costs as part of the deal. When a transaction is structured correctly and your offer is competitive, this is often achievable without costing you the home. This is one of the reasons having a strategically structured loan before you start shopping matters so much. Your offer needs to be strong enough to win while still asking for seller concessions.
Colorado Housing Finance Authority (CHFA) Down Payment Assistance When a seller credit isn't possible, in a highly competitive multiple-offer situation, for example, the Colorado Housing Finance Authority offers a Down Payment Assistance program whose funds can be applied to closing costs. This is a legitimate option that keeps cash in your pocket.
The trade-off worth knowing: CHFA DPA loans carry a slightly higher interest rate than a standard VA loan without assistance. Whether that trade-off makes sense depends on your specific situation, how long you plan to stay in the home, and what the numbers look like for you. It's not a one-size-fits-all answer, which is exactly why we talk through it before you ever make an offer.
Bottom line: Zero down does not mean zero closing costs, but with the right strategy, we can often get you very close to zero out of pocket. The key is knowing which tool to use and when.
Have questions about closing costs on your VA loan in Colorado Springs? Call or text Linnea directly at 719-200-1171.
Technically, the VA does not have a minimum credit score requirement. But before you get too excited, that doesn't mean you can have bad credit and walk right into a VA loan.
So what does my credit need to look like?
It really depends on the mix. A few late payments or a handful of non-medical collections may not be a dealbreaker. However, if you have multiple charge-offs, excessive late payments, or a lot of unpaid non-medical collections, you may need to spend some time, typically 12 to 24 months, reestablishing your credit before you can qualify. The key is whether you have enough good credit to offset the bad.
How is VA different from a conventional loan when it comes to credit?
VA is significantly more lenient than a conventional loan, but you still have to demonstrate a willingness to repay your debts. The guidelines aren't always black and white, and a lot of situations fall somewhere in the middle.
Should I just pay off my old collections or charge-offs to clean things up?
Please don't do this without talking to a lender first. Paying off old collections or charge-offs can actually work against you in some situations. This is not the place to guess.
What should I do if I'm not sure where I stand?
Talk to a lender and let them pull your credit and take a look at the full picture. They can tell you whether you're ready to move forward now, or whether there are specific steps you need to take first. An experienced mortgage professional who understands VA guidelines will be able to map out exactly what needs to happen and in what order, saving you a lot of time and frustration.
Possibly, yes. Having a bankruptcy in your credit history does not automatically disqualify you from a VA loan. The VA looks at the full picture, including the reasons for the bankruptcy and the type of filing.
What if I filed Chapter 7 bankruptcy?
Chapter 7 is a full liquidation and discharge of debts. Here's how the timing breaks down:
If your Chapter 7 was discharged more than two years ago, it can typically be disregarded and you may be able to move forward.
If your Chapter 7 was discharged within the last one to two years, qualifying is much harder. Both of the following would need to be true, you would need to have reestablished credit after the bankruptcy and been making payments satisfactorily over a continued period, and the bankruptcy would need to have been caused by circumstances beyond your control, such as job loss, a prolonged strike, or medical bills not covered by insurance. It's worth noting that divorce is generally not considered a circumstance beyond your control under VA guidelines.
If your Chapter 7 was discharged within the last 12 months, it will generally not be possible to qualify.
What if my Chapter 7 was caused by the failure of my own business?
This is a specific situation the VA addresses separately. If your bankruptcy stemmed from a failed business rather than personal financial mismanagement, you may still be able to qualify if all four of the following are true, you obtained permanent employment after the business failed, there was no derogatory credit prior to your self-employment, there was no derogatory credit after the bankruptcy, and the business failure was not due to your own misconduct.
What if I filed Chapter 13 bankruptcy?
Chapter 13 is a repayment plan where you make regular payments to a court-appointed trustee over two to five years to pay off some or all of your debts. The VA views this type of filing as a genuine effort to pay creditors, and the guidelines reflect that.
If you have completed all of your Chapter 13 payments satisfactorily, a lender can conclude that you have reestablished your credit.
If you are still in your Chapter 13 plan but have made at least 12 months of satisfactory payments, you may still be able to qualify, as long as the bankruptcy trustee or judge approves the new credit.
What's the takeaway?
A bankruptcy in your past doesn't necessarily mean a VA loan is out of reach. The guidelines are more nuanced than a simple yes or no, and a lot depends on the type of bankruptcy, how long ago it was, why it happened, and what your credit looks like since. Talk to a lender, walk them through your situation, and let them help you figure out where you stand.
Possibly, yes. Having a foreclosure, deed-in-lieu, or short sale in your history does not automatically disqualify you from getting a VA loan. Every situation is looked at individually, and the full facts and circumstances of the foreclosure matter.
Is there a waiting period after a foreclosure?
It depends on how long ago it was finalized. Here's how it generally breaks down:
If your foreclosure was finalized more than two years ago, it can typically be disregarded and you may be able to move forward.
If your foreclosure was finalized within the last one to two years, qualifying becomes much more difficult. In that case, two things would both need to be true, you would need to have reestablished credit after the foreclosure and been making payments satisfactorily over a continued period, and the foreclosure would need to have been caused by circumstances beyond your control, things like job loss, a prolonged strike, or medical bills that weren't covered by insurance.
What if my foreclosure was tied to a bankruptcy?
If your foreclosure, deed-in-lieu, or short sale happened in connection with a bankruptcy, the clock doesn't start until the later of two dates, either the discharge of the bankruptcy or the date the title of the home was actually transferred. If there was a significant delay in the title transfer, your lender may need to reach out to the VA for additional guidance.
What's the takeaway?
A foreclosure in your past doesn't necessarily close the door on a VA loan. The guidelines look at the whole picture, including what caused the foreclosure and what you've done since. The best thing you can do is talk to a lender, walk them through your situation, and let them help you figure out where you stand.
Questions about VA loans, previous foreclosure and if you can qualify? Call or text Linnea at 719-200-1171 — let's talk band see if we can get you out home shopping.
In most cases, yes! A previous foreclosure on a VA loan does not automatically disqualify you from using your VA benefit again, and you may even still be able to buy with 0% down.
How does a previous foreclosure affect my eligibility?
Your COE will show if a previous VA loan was foreclosed on and how much of your VA guaranty was used to settle what was owed to the lender. That amount factors into how much remaining eligibility you have for a future purchase.
Will I always be able to buy with 0% down after a foreclosure?
Not always, but in most cases it's possible. Whether you can buy with zero down comes down to a few variables, including the purchase price of the home you want to buy, the conforming loan limit for the county you're buying in, and the amount of entitlement that was charged from the previous foreclosure. You'll also need to meet the guidelines for the required waiting period since the foreclosure.
What's the bottom line?
Even if you've had a foreclosure on a VA loan, there's a good chance you can still buy a home using your VA benefit with little to nothing down. But because the calculation involves several moving parts, my strong advice is to sit down with a lender and let them run the numbers for you. Don't count yourself out before you've had that conversation.
There are three categories to know about when it comes to VA mortgage eligibility, and understanding where your discharge falls can save you a lot of guesswork.
The first category is the fully qualifying discharges. If you were discharged Honorably, or Under General (Honorable) Conditions, you're in good shape and can move forward with the VA loan process without any additional hurdles.
The second category includes discharges that require a review before eligibility can be determined. This is where things get a little more nuanced, so let's walk through it.
What if I received an Other Than Honorable (OTH) discharge?
An OTH discharge does not automatically disqualify you from VA home loan benefits, but it does require a Character of Discharge Review by the VA. This is a case-by-case process, and having the right support can make a big difference. Your lender can help you navigate this.
What about a Bad Conduct Discharge (BCD)?
This one depends on how the BCD was handed down, and the distinction really matters.
If your Bad Conduct Discharge came from a special court-martial, you are not automatically disqualified, but it will require an extensive review by the VA.
If your Bad Conduct Discharge came from a general court-martial, you are automatically ineligible for VA home loan benefits.
What discharges are completely disqualifying?
A Dishonorable Discharge will make you ineligible for a VA home loan. There is no review process available for this discharge type.
What can I do if my discharge requires a review?
If your discharge doesn't automatically qualify you, you have a couple of options. You can submit your service records to the VA for a case-by-case review, and your lender can help you with that process. You can also apply for a Discharge Upgrade by filing the appropriate forms with your branch of service through the Discharge Review Board or the Board for Correction of Military Records.
The VA funding fee is one of the most misunderstood costs in the VA loan process, and depending on your situation, it either doesn't apply to you at all, or it's something you need to plan around carefully.
Who Doesn't Pay the Funding Fee
If you have a disability rating, this is one of the most valuable benefits of your VA entitlement and confirming your exemption status is one of the reasons you need to be fully pre-approved before you ever start looking at homes. Exemption from the funding fee affects your loan amount, your monthly payment, and your overall financial picture. We confirm this at the very beginning of the process, not at the closing table. This is exactly why a quick online pre-qualification is never enough, a thorough, fully underwritten pre-approval is where details like this get identified and locked down so there are no surprises.
Who Does Pay the Funding Fee
Active duty service members, as a general rule, do not carry a disability rating — which means most active duty buyers will pay the funding fee. The amount depends on whether this is your first use of your VA benefit or a subsequent use:
The funding fee is typically rolled into the loan rather than paid out of pocket at closing, which means you start out owing slightly more than the purchase price of the home.
Why This Matters and What You Need to Plan For
This is the part of the conversation I have with every active duty buyer, because I want you going in with eyes open.
When you finance the funding fee into your loan, you start the ownership experience slightly underwater. That's not a reason not to buy but it is a reason to understand your timeline.
Here's how I think about it with my clients: to sell a home in Colorado Springs, you're looking at roughly 6% in real estate commissions plus potentially a 2.5% seller credit or concession to help your buyer with closing costs. Add the 3.3% funding fee on a subsequent use loan and you're looking at approximately 11.8% in total costs that need to be covered before you walk away from a sale without writing a check.
Colorado Springs has a 66-year average appreciation rate of 4.53% annually. At that rate, you need roughly three years of appreciation to reach the point where you can sell the home cleanly without coming out of pocket. That's the number I use as a planning benchmark with active duty buyers plan to be in the home at least three years.
This isn't meant to discourage you from buying. Homeownership still builds wealth in ways renting never will, and locking in a payment now protects you from rent increases and builds equity over time. But going in with a realistic picture of your timeline protects you from a short sale situation down the road and that's a conversation worth having before you sign anything.
The Bottom Line
If you have a disability rating, the funding fee doesn't apply to you and this is a non-issue. If you're active duty, let's talk about your timeline before you start shopping. A three-year commitment to the home changes the math significantly in your favor.
Yes, but whether you qualify for a refund depends almost entirely on timing. And timing is something we need to talk about before you ever start looking at homes.
This is one of the most consequential conversations I have with retiring and separating service members at Fort Carson, Peterson Space Force Base, Schriever Space Force Base, and the U.S. Air Force Academy. Getting this wrong can cost you thousands of dollars that you were entitled to keep.
The Core Rule
If you paid a VA funding fee on your loan, you may be eligible for a full refund if you are later awarded a service-connected disability rating, but only under specific circumstances tied directly to when your disability claim was filed relative to your loan closing date.
Scenario One: Disability Claim Filed Before Your Loan Closes
If you have a disability claim pending with the VA at the time your loan closes, and that claim is subsequently approved, you are entitled to a refund of the funding fee, even if the rating isn't granted until after closing. The key is that the claim was already in process when the loan funded.
For service members who are in the process of retiring or separating from the military, this is critical. If you have initiated the disability claims process before your separation date and before your loan closes, you are in the strongest possible position for a refund if your claim is approved.
Scenario Two: Disability Claim Filed After Your Loan Closes
If you file your disability claim after your loan has already closed, the path to a refund is significantly more difficult. In this scenario, a refund is only possible if the VA backdates your disability rating to a date on or before your loan closing date. This is a much harder standard to meet and cannot be counted on or planned around.
This is where the timing of your separation from the military, the initiation of your disability claim, and your home purchase all intersect, and where the stakes are high enough that getting the sequence right matters enormously.
What This Means for Retiring and Separating Service Members in Colorado Springs
Colorado Springs has one of the highest concentrations of military retirees and veterans in the country, and many of the buyers I work with are in exactly this transition; separating or retiring from one of our installations and either staying in the area or returning after working for one of the many defense contractors here.
If you are anywhere in the process of separating or retiring from the military, here is what I want you to know:
Do not start looking at homes before we have talked. The interaction between your separation timeline, your disability claim filing date, and your loan closing date is complex, and the sequence matters in ways that can directly affect your financial outcome. This is not a conversation to have after you've fallen in love with a house. It's a conversation to have at the very beginning of the process, before you've looked at a single listing.
I also strongly recommend working with a Veterans Service Officer (VSO) to navigate the disability claims process itself. That side of the equation is their expertise, not mine. What I bring to the table is understanding how the timing of that process intersects with your mortgage, and making sure we structure your home purchase so you don't leave money on the table.
The Bottom Line
A funding fee refund can put thousands of dollars back in your pocket if your disability claim is handled correctly and the timing lines up. Whether that opportunity exists for you depends on conversations that need to happen before you ever start the homebuying process, not after.
If you are retiring or separating from the military and thinking about buying a home in Colorado Springs, call or text Linnea at 719-200-1171 before you do anything else. This is exactly the kind of conversation that can make a significant difference in your financial outcome.
Most people know that veterans with a service-connected disability rating are exempt from the VA funding fee, but there are two additional groups who qualify for an automatic exemption that often gets overlooked.
Purple Heart Recipients
If you have been awarded the Purple Heart, you are exempt from the VA funding fee, and importantly, you do not need to wait for a disability rating to be approved before closing on your home.
This is a common misconception worth clearing up. A Purple Heart is not an automatic disability rating. The two are separate processes entirely, and many Purple Heart recipients are still working through the VA disability claims process when they are ready to buy a home. You do not need to wait. If you have been awarded the Purple Heart, your funding fee exemption applies at closing regardless of where your disability claim stands in the process.
Surviving Spouses Receiving Dependency and Indemnity Compensation (DIC)
Surviving spouses who are receiving Dependency and Indemnity Compensation from the VA are also fully exempt from the funding fee. If you are a surviving spouse using your VA loan benefit and you receive DIC, you will not pay the funding fee at closing.
Why This Matters and Why We Talk About It Before You Start Looking
Both of these exemptions need to be identified and documented at the very beginning of the loan process not at the closing table. Confirming your exemption status is part of the fully underwritten pre-approval process, and it directly affects your loan amount, your monthly payment, and your overall financial picture.
If you think you may qualify for either of these exemptions, that is a conversation we need to have before you ever start looking at homes. Don't assume your exemption status will be figured out later, let's confirm it upfront so your pre-approval reflects the full picture from day one.
Questions about VA funding fee exemptions? Call or text Linnea at 719-200-1171 — let's talk before you start shopping.
The short answer is yes — but not necessarily the veteran themselves. This is one of the most misunderstood rules in the VA loan program, and it causes some active duty service members to walk away from homeownership unnecessarily.
The Standard Rule
VA loan guidelines require that the property be occupied as a primary residence within 60 days of closing. This is a firm requirement — VA loans are not designed for investment properties or vacation homes.
What Most People Don't Know
The occupancy requirement does not mean the veteran or service member must physically be living in the home within 60 days. If the veteran's spouse or dependent children move into the home within that 60-day window, the occupancy requirement is satisfied. The family's presence in the home counts as the veteran's occupancy under VA guidelines.
Why This Matters for Active Duty Service Members in Colorado Springs
This is a conversation I have regularly with active duty service members at Fort Carson, Peterson Space Force Base, and Schriever Space Force Base. A service member PCSing to one of our installations may be facing a deployment shortly after arrival — sometimes within weeks of reporting. Many of them assume they cannot buy a home because they won't be able to move in themselves within 60 days, so their families end up renting off-base or settling into base housing instead of building equity in a home they own.
That assumption is costing them.
If your spouse and children are moving to Colorado Springs with you — or ahead of you — and they will be living in the home within 60 days of closing, the occupancy requirement is met. You do not have to be there yourself. Your family's presence in the home satisfies the VA's occupancy rule.
What You Should Do
If you are PCSing to Colorado Springs and you know a deployment is on the horizon, do not assume homeownership is off the table. Call me before you make any housing decisions. The occupancy rules may be more flexible than you think, and buying now rather than renting could put you in a significantly stronger financial position — both during your deployment and when you return.
This is exactly the kind of situation where getting fully pre-approved before you arrive — or even before your orders are cut — gives you options that waiting will take away.
PCSing to Fort Carson, Peterson SFB, or Schriever SFB? Call or text Linnea at 719-200-1171 before you make any housing decisions. Let's look at your options together.
This is one of the most persistent myths in the VA loan program and it stops some eligible buyers from purchasing a home they could absolutely buy. Let's clear it up.
The Myth
Many veterans and service members believe they must live in a VA-financed home for two years before they can sell it or rent it out. This belief is widespread enough that it causes some VA-eligible buyers to choose renting over buying because they're worried about what happens if they get orders or life circumstances change.
It is not true.
The Reality — It's About Intent
The VA does not impose a minimum ownership or occupancy period before you can sell or rent your home. What the VA cares about is intent. Did you purchase the home with the genuine intention of using it as your primary residence? If the answer is yes, and circumstances later changed that required you to move, sell, or rent you are not in violation of your VA loan terms.
Life happens. The VA understands that. Some of the circumstances that commonly trigger an earlier than expected move include:
In any of these cases, you have options. You can sell the home, or you can rent it out and potentially use your remaining VA entitlement to purchase another primary residence elsewhere.
Why This Myth Keeps People from Building Wealth
The two-year myth is particularly damaging for active duty service members who know they are likely to PCS within a few years. They talk themselves out of buying because they're afraid of being stuck with a home they can't sell or rent. Meanwhile they spend years paying someone else's mortgage instead of building equity in their own home.
If you are active duty and you know there's a reasonable chance you'll be moving in the next two to four years, that is not a reason to avoid buying. It is a reason to have a thoughtful conversation about your timeline, your options, and how to structure your purchase so you are in the strongest possible position whether you end up selling or converting the home to a rental when your next set of orders comes.
The Bottom Line
The VA loan program was designed for people whose lives don't follow a predictable script. There is no two-year rule. What matters is that you bought the home intending to live there, and that when circumstances changed, you handled the situation appropriately.
If you are worried that your timeline might make a VA loan complicated, call me before you make any decisions. In most cases the situation is far more manageable than you think.
Questions about VA loan occupancy and your options if you need to move? Call or text Linnea at 719-200-1171 — let's talk through your specific situation before you rule anything out.
Not directly, no. VA loans are intended for primary residences only, meaning you need to plan to live in the home you are purchasing. However, that doesn't mean you can't build wealth through real estate with your VA benefit, and there are more options here than most people realize.
Does the property have to be a single family home?
No, and this is one of the most underused aspects of the VA loan benefit. You can use a VA loan to purchase a property with two, three, or four units as long as you plan to live in one of them as your primary residence. The rental income from the other units can be a great way to offset your mortgage payment while you're living there.
What happens when I move out? Do I have to sell or pay off the VA loan?
You can keep it. When you move out you are allowed to retain the property and rent out the unit you were previously living in, effectively turning it into an investment property. Your VA loan stays in place, and you are not required to refinance out of it just because it is no longer your primary residence.
Can I refinance my VA loan even after it becomes a rental property?
Yes, and this is a great benefit that not many people know about. Even after the property transitions to an investment property, you can still use a VA Interest Rate Reduction Refinance Loan, commonly known as a VA IRRRL, to lower your rate if rates drop. The key is that the property was originally purchased as your primary residence using your VA benefit.
What's the takeaway?
Your VA loan benefit is limited to primary residences at the time of purchase, but smart planning can turn that into a long term investment strategy. Buying a multi-unit property, living in one unit, and eventually transitioning it to a rental while keeping your VA loan is a legitimate and really effective way to build wealth. Talk to a lender who understands VA guidelines and can help you think through the possibilities.
Yes, you can! The VA does allow you to buy a home with a non-spouse co-borrower, whether that's a boyfriend, girlfriend, fiancé, or an adult child. However, there is an important difference you'll want to know about before you start shopping.
Why can't I buy with 0% down if I'm buying with a non-spouse co-borrower?
This is one of the biggest surprises veterans run into, so let's break it down. When a veteran or service member buys a home on their own, or with a spouse, the VA guarantees 25% of the loan amount. That guarantee is what allows lenders to offer that amazing 0% down benefit.
When you bring in a non-spouse co-borrower, the VA guarantee gets cut in half, down to 12.5%. Because the guarantee is reduced, the co-borrower will need to bring 12.5% down to make up the difference. So while you can absolutely buy with a partner, fiancé, or adult child, it does require some skin in the game on their end.
Does the veteran still have to put money down in this scenario?
The 12.5% down requirement in a non-spouse co-borrower situation is tied to the gap in the VA guarantee, not specifically to who provides the funds. That said, this is a great conversation to have with your loan officer so you can map out exactly how the numbers work for your specific purchase.
Is it still worth using my VA loan if I'm buying with a non-spouse?
Absolutely, it can be! Even with the down payment requirement, VA loans still come with great benefits, like no private mortgage insurance and competitive interest rates. It's worth running the numbers and comparing your options so you can make the best decision for your situation.
Yes! If you're a veteran or service member taking out a VA loan in your name only, your spouse can absolutely be on title without being on the loan. This is a pretty common setup and it works just fine.
What if I want to add someone other than my spouse to the title, like a fiancé, an adult child, or a parent?
This is where it gets a little tricky. The spouse-only exception doesn't extend to anyone else. If you want a non-spouse on title, they would need to be on the loan as well, and as we covered in the previous FAQ, that comes with a 12.5% down payment requirement.
I've heard I can just do a quit claim deed after closing to add someone to the title. Is that a good idea?
I'd actually advise against that. While people do suggest it as a workaround, adding a non-spouse to title after closing via a quit claim deed can technically trigger a due-on-sale clause, meaning the lender could call the entire loan due. It's not a risk worth taking when there are other options worth exploring.
You can request it yourself through eBenefits, but honestly, the easiest thing to do is just let your lender get it for you. As a lender, I can pull it up in about three minutes, and I never require my clients to track it down on their own. One less thing on your plate!
What if my COE isn't available online?
It happens sometimes. If there's inaccurate information on file at the VA, your COE may not be available through the online system. If you can provide a copy of your DD214, I can work directly with the VA to get it sorted out for you. That way you're not stuck trying to navigate that process on your own.
Quite a bit, actually! Here's a breakdown of what your lender will be looking at.
What is an entitlement code and what does it mean?
Your COE will include an entitlement code, and there are 11 codes in total. Most of them indicate when you served, or whether you are a surviving spouse, or the spouse of a POW/MIA. The code that tells your lender the most, though, is a code 05. That means you've used your VA home loan benefit before, which is important because it affects your funding fee.
What is the funding fee and how does the COE affect it?
The VA funding fee for first time use is 2.15% of the loan amount. If your COE shows a code 05, meaning you've used the benefit before, that fee goes up to 3.30%. However, if you have a VA disability rating, you won't pay a funding fee at all, and your COE will also show the amount of your monthly disability payment.
What else does the COE show?
Your COE will also show your branch of service, and importantly, whether you have any active VA home loans or a claim against your VA guaranty from a previous foreclosure or deed in lieu. This matters a lot for what comes next.
Yes, you can, but it gets a little more involved. If you have a current VA mortgage outstanding, your lender will need to calculate your remaining entitlement, which could reduce the amount you're able to finance with 0% down. It doesn't mean you can't buy, it just means a down payment may be required depending on the purchase price.
The formula for this is genuinely complicated, so if you have an existing VA loan and are thinking about buying another home with your VA benefit, my advice is to sit down with a lender and let them run the numbers for you. They can tell you exactly how much remaining eligibility you have and what purchase price you can hit without needing to bring money to the table.
Not exactly, and this is one of the things that makes the VA loan truly unique. Instead of capping you at a set debt-to-income ratio, VA loans look at something called residual income, which is a much more practical way of evaluating whether you can comfortably afford a home.
What is residual income?
Residual income is the money you have left over at the end of the month after all of your obligations have been paid. That includes your monthly housing costs, principal, interest, property taxes, homeowners insurance, and any HOA dues, as well as your debt payments like car loans, credit cards, installment loans, and student loans. It also factors in childcare costs, state and federal income taxes, and social security taxes. On top of all of that, the VA calculation even accounts for the square footage of the home to estimate monthly maintenance and utility costs. What's left after all of that is your residual income, the money available for everyday living expenses like groceries, car insurance, and the occasional night out.
How much residual income do I need?
It depends on your family size and where you live. Here in Colorado Springs, serving the soldiers at Fort Carson and the Airmen and Guardians at Peterson Space Force Base, the Air Force Academy, and Schriever Space Force Base, the minimums are as follows. A single borrower needs at least $491 per month, a borrower and spouse need at least $823 per month, and a family of five needs at least $1,158 per month. For each additional family member beyond five, add $80 per month.
How is this different from how other loans calculate affordability?
Most other loan types, conventional, FHA, and USDA for example, add up your monthly housing costs and contractual debt payments, divide that total by your gross monthly income before taxes, and cap you at a maximum ratio, typically 50%. The problem with that approach is that it doesn't account for taxes, utilities, maintenance, or the actual cost of living for your family size.
Can I still qualify for a VA loan if my debt-to-income ratio is over 50%?
Often, yes. Because VA loans prioritize residual income over DTI, it is possible to exceed the 50% threshold that would disqualify you from most other loan types and still get approved, as long as your residual income meets the requirement for your family size. This is one of the reasons VA loans are so powerful for veterans and service members, they reflect the real world a lot better than a simple ratio does.
VA Minimum Property Requirements, or MPRs, are standards set by the VA to make sure the home you're buying is safe, structurally sound, and sanitary. They want to know you're moving into a home that's truly ready for you.
What do VA Minimum Property Requirements cover?
They cover quite a bit! The requirements look at safety items like electrical systems and wiring, sanitary concerns like water and sewer, and even the property's location, making sure it's accessible year round. There are also legal considerations involved, such as private road agreements, zoning, and local housing authority code requirements.
What if the home has a well or a septic system?
Great question, and this one comes up a lot. If the home has a well, you'll need a water test completed to confirm you have safe drinking water. If there's a septic system, you may also need to have a septic inspection done. These are important steps to protect you and your investment.
Who should I talk to about VA Minimum Property Requirements?
Talk to your lender, not your Realtor, about VA Minimum Property Requirements. The list is extensive, and your lender is the right resource to walk you through what applies to your specific situation.
Tidewater is one of the biggest advantages that comes with using your VA loan benefit, and it's something other loan types simply don't have. When an appraiser is having trouble reaching a value equal to what you're paying for the home, they pause the process and ask the lender to work with both the listing agent and your buyer's agent to provide the comparable sales they used when pricing the home. It's a built-in checkpoint that gives everyone a seat at the table before a final value is determined.
How does the Tidewater process actually work?
Once Tidewater is initiated, the agents submit their comparable sales to the appraiser for review. If the appraiser doesn't agree with those comparables, they make a note in the appraisal explaining why. For example, maybe the comparables were single-story homes but yours is a tri-level, or the sales used were six miles away from the subject property. That transparency is really important, because it keeps the process honest and well-documented.
What if the comparable sales aren't a perfect match to my home?
That's actually where Tidewater really shines. Comparable sales don't always need to be a model match, meaning the same builder, floor plan, or layout, to be relevant. Sometimes there's something specific about the location or a unique feature of the home that adds value the appraiser may simply not be aware of yet. Tidewater gives the agents the opportunity to bring that context forward so it can be considered.
Why is Tidewater such a big deal for VA buyers?
Because the last thing you want is to buy a home that's overpriced, and you also don't want to lose your dream home over an appraiser's opinion that may not have had the full picture. Tidewater gives everyone the chance to hash out the differences and really determine whether the property is worth what you're paying. You can move forward with confidence knowing the value has been thoroughly vetted, not just accepted at face value.
Where did the name "Tidewater" come from?
Great question! The process was created by the VA at a conference held in Tidewater, Virginia, and the name just stuck. It's a uniquely VA process, which is just one more reason your VA loan benefit is so valuable when it comes to protecting you as a buyer.
A home appraisal and a home inspection are two completely different things, and even though the word "inspection" gets used in the appraisal process, it is not a comprehensive home inspection.
The Appraisal
An appraisal is required on every home purchase when you're obtaining a VA mortgage. It's completed by a licensed real estate appraiser who has also gone through additional training to become VA approved. Here in Colorado Springs, the majority of appraisers do carry their VA approval, and that makes a lot of sense given that we have Ft. Carson, Peterson SFB, Schriever SFB, USAFA, and Cheyenne Mountain SFB right here, plus thousands of retired servicemembers and defense contractor employees who call this area home. VA appraisers here do a lot of VA appraisals!
The appraiser is looking at the home from a value standpoint. They will compare the home you are buying to similar homes in the neighborhood that have sold within the last six months to determine whether the price you are paying is a fair price. You don't want to overpay for a home, so the appraisal is a very important part of the transaction.
To arrive at a value, the appraiser will research comparable sales and make adjustments, up or down, for things like recent updates, quality of construction, lot size, major upgrades, and the age of the home.
The appraiser will then visit the property to conduct their "inspection," which is essentially a visual walkthrough to assess the overall condition of the home. They are looking at the basic health and safety of the property to determine whether it is safe, sanitary, and structurally sound. Think along the lines of: Are the stair handrails sturdy? Is the wood on the deck rotting? Does the foundation have large cracks? Is there reliable plumbing that delivers clean drinking water and toilets that flush properly?
What the appraisal inspection will not do is get into the mechanics of your HVAC system or check whether there is a clogged sewer pipe waiting to cause problems. That is where the home inspector comes in.
The Home Inspection
A home inspection is not mandatory, it is completely optional, but if you are getting a VA loan in Colorado Springs, or anywhere else for that matter, it is absolutely advisable to get one. Even if you are buying a brand new construction home, you should still hire a home inspector.
The inspector will look at all of the systems that keep your home running: electrical, HVAC, plumbing, and more. They will most likely conduct at least a drone inspection of the roof, and if they see issues, they may recommend bringing in a roofing company for a more thorough look. They may also run a camera through the sewer lines leading to the city system or a septic tank to check for any hidden issues, and if something looks concerning, they will point you toward a plumber.
Think of the home inspector like a general contractor. They have broad knowledge of homes and home systems, and they know when to call in the subject matter experts. They are looking for anything that needs immediate attention or that may point to deferred maintenance.
Don't skip the home inspection. It is a small investment upfront that could save you thousands down the road.
The Bottom Line
When you have found your home in Colorado Springs or the surrounding area, remember this: the appraisal is mandatory and the home inspection is optional, but they are both inspecting the home for very different reasons, and the appraiser and the home inspector have very different areas of expertise. Even though that home inspection is optional, I always advise my clients to get one right at the very beginning of the transaction.
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