VA Loans: Multiple Properties, Federal Tax Debt, Student Loans, Trailing Spouse Income

There are so many guidelines that no one can know them all, but knowing where to find the answers is important.  This is what we look to do for buyers, real estate professionals, and others who need answers to tough mortgage and real estate questions.  If you have a scenario on a VA or other loan type, give us a call.

Is there a limit to the number of properties a Veteran can own?

Sometimes a Veteran may own several to many properties and while some mortgage products have limits, VA does not as long as it makes sense.  This means that a buyer could own 5 rental properties and purchase a new home with a VA loan assuming that it will be occupied as the primary residence.  An important thing for Veterans and all borrowers to know is to always tell the truth on the application.  Using a loan like VA to purchase a property which will really be a rental or second home is fraud.  Yet as long as the buyer will occupy the home within 60 days of closing and intend to continually in the foreseeable future to occupy the dwelling, it should be ok.

If a Veteran owes federal taxes, is an issue on a VA loan?

It can be.  VA has told us that if a Veteran owes Federal taxes they must have been in a repayment plan for at least 1 year.    They will sometimes accept a 6 month history  but the rest of the credit needs to be excellent in order to make that exception . The Veteran Affairs was clear – they do NOT allow a Veteran to set up a new payment plan at the time of loan application. The handbook is very vague in this area which is why we got the answer directly from the VA Underwriting Support Desk.  If a payment plan is in place, the payment must be included in the debt ratio and residual income calculations.

Is it ok for a VA borrower not to primarily live in the new home?

Yes, in certain circumstances he/she can.  VA allows for this as long as someone in the family will occupy the home as the principal residence.  This can be used in situations such as:

• A borrower’s family is moving to a new area but the borrower continues to work in their previous home / area while looking to transfer to the new home area
• A service member is stationed a long distance from the home, but will come home on weekends or similar
• A borrower has a history of working a long distance from their home such as a truck driver, national or regional sales, or others
• A service member is waiting to be transferred to a new base but it has not happened yet

In these cases, we would need a detailed explanation letter, documentation to support, and would need to count any housing and commuting expenses.  These expenses could include flight or driving costs, rent for the temporary home, and there are even costs to include when living rent free.  Every situation is different, so ask us about your scenario.  Learn more

How does VA treat deferred or income based repayment student loans?

If loan payments are scheduled to begin within 12 months of the closing, the anticipated payment monthly payment must be considered in the loan analysis.  Over 12 months MAY not need to be included in the analysis, but we would need to see the documentation and request an underwriter to review it.

If the credit report doesn’t state anything such as deferred or income based repayment, we would go by the credit report and no further student loan documentation is normally required in this scenario

Also per VA, Lenders may use the IBR (income based repayment) payment if it is verified (including $0.00) when the payment is fixed for a minimum of 12 months post-closing date.  When fixed for less than 12 month post-closing the lender must use the regularly calculated payment that will be due once the IBR ends.  When no payment is reported or available the lender must use a payment calculation using 5% of the current report balance as the monthly payment.

So the important thing to remember if you have student loans and are looking for a VA loan, talk to our VA loan experts to get the correct answers.

Additional Resources:

• Creative Solutions VA Loans Will Allow to Help a VA Buyer Qualify
• Determining if a primary residence is within a reasonable commute to work