IFC Loans

Question: Can I get a VA loan if I have had a bankruptcy in the last few years?

Answer: VA credit standards state that a veteran with a bankruptcy less than 3 years ago would generally not be considered a satisfactory credit risk unless: the veteran or spouse has obtained items on credit since the bankruptcy and has paid the obligations in a satisfactory manner for a continued period; and the bankruptcy was caused by circumstances beyond the control of the borrower, which would have to be verified. A bankruptcy discharged 3 to 5 years ago must be given some consideration in the underwriting of the loan. A bankruptcy discharged more than 5 years ago may be disregarded. These are the minimum standards that mortgage companies must follow when making a VA loan.

Question: How big of a loan can I get? If my guaranty entitlement is $36,000, does this mean I am limited to a $36,000 loan?

Answer: There is no limit on the size of a VA guaranteed home loan, provided that the veteran is qualified for the loan from a credit and income standpoint. However, as a practical matter, companies will generally limit the maximum loan amount to 4 times the amount of the veteran's available entitlement plus any down payment.

Question: Why do I have to pay a fee for a VA home loan? Since I paid a fee for my first loan, why is there a larger fee for my second loan?

Answer: The VA funding fee is required by law. The fee, currently 2 percent on no down payment loans, is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The funding fee for second time users who do not make a down payment is 3 percent. The idea of a higher fee for second time use is based on the fact that these veterans have already had a chance to use the benefit once, and also that prior users have had time to accumulate equity or save money towards a down payment. Second time users who make a down payment of at least 5 percent pay a reduced funding fee of 1.5 percent, the same as first time users making the same down payment. For a 10 percent down payment, the fee drops to 1.25 percent. The effect of the funding fee on a veteran's financial situation is minimized since the fee may be financed in the loan.