Utah VA Loans Guide: Understand Your Options
As of June 1, 2023, a 30-year fixed VA loan in Utah is 5.5%(6.058%APR)
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For veterans of the U.S. Armed Forces, current military service members, and surviving spouses, VA loans offer significant advantages when in the market for a home in Utah. VA loans are affordable mortgage options for people who have qualifying military service and for surviving spouses who can obtain a Certificate of Eligibility (COE). VA loans are guaranteed by the U.S. Department of Veterans Affairs (VA) and allow people to qualify for an affordable mortgage even when their credit is not perfect.
What Are VA Loans?
VA loans are mortgage loans that are partially guaranteed by the U.S. Department of Veterans Affairs. Only military service members, veterans, and qualifying surviving spouses are eligible for VA loans. VA-backed mortgages offer the following unique advantages to eligible homebuyers:
- No down payment
- Can be transferred to other VA-eligible buyers
- No mortgage insurance
- Lower closing costs
- Less stringent qualification standards than other mortgages
How Does A VA Home Loan Work?
VA loans are issued by banks, credit unions, and private mortgage lenders and not directly by the VA. However, the VA sets the qualification guidelines for VA loans and determines which lenders can issue them. Since VA loans are backed by the VA, lenders face a lower risk of default and are likelier to approve mortgage applications.
Since VA loans do not meet the guidelines for conventional mortgages set by Freddie Mac and Fannie Mae, they are non-conforming loans. This means that eligible homebuyers can qualify more easily because of the VA’s more flexible credit requirements. As compared to conventional mortgages, VA loans offer several advantages, including lower rates of interest, easier borrowing requirements, and $0 down payments. The fees Utah lenders can charge at closing are capped at 1%, so these types of home loans might also have lower total closing costs. You also won’t have to pay monthly mortgage insurance, but you will likely need to pay an upfront funding fee.
Understanding the VA Funding Fee
The funding fee is the VA’s version of mortgage insurance, but it is a single payment rather than being paid monthly. It is an amount ranging from 1% to 3.6% of the loaned amount based on your down payment and the type of VA loan you are applying for. It is used to fund the guarantee provided by the VA.
For VA home purchase loans closed before April 7, 2023, the following funding fees apply:
|Down Payment – First Use||Down Payment – Second Use||Funding Fee Percentage – First Use||Funding Fee percentage – Second Use|
|Under 5%||Under 5%||2.3%||3.6%|
|5% to less than 10%||5% to less than 10%||1.65%||1.65%|
In Circular 26-23-06, the VA announced a reduction in funding fees for certain VA loans that are closed on or after April 7, 2023. For comparison, the following rates will apply for purchase loans after that date:
|Down payment – First use||Down payment – Second use||Funding fee percentage – First use||Funding fee percentage- second use|
|Less than 5%||Less than 5%||2.15%||3.3%|
|From 5% to less than 10%||From 5% to less than 10%||1.5%||1.5%|
|10% or higher||10% or higher||1.25%||1.25%|
Other funding fee percentages apply to different types of VA loans.
VA Loan Types
The following are the different types of VA loans:
- VA home purchase loan – VA-backed mortgage to purchase a home
- VA jumbo loan – VA loan that is above the conforming loan limits
- VA renovation loan – VA mortgage plus additional funds to renovate a home
- VA cash-out refinance loan – VA loan used to convert the equity of a home into cash
- VA rate or term refinance loan – Refinance loan for people who have non-VA loans and want to refinance into VA loans
- VA interest rate reduction loan (VIRRL) – Refinance loan for people with existing VA loans who want to refinance to get a lower rate of interest
Who Qualifies for a VA Loan?
Not all military service members or spouses of veterans will qualify for a VA loan. The basic qualifications are explained below.
Service Criteria for Military Service Members
Military service members must meet one of the following criteria to qualify for a VA loan:
- Served on active duty during wartime for a minimum of 90 consecutive days
- Served on active duty during peacetime for a minimum of 181 consecutive days
- In the Reserves or the National Guard and have served at least six years
- In the National Guard or Reserves and served full-time duty under Title 32 for at least 90 days with 30 days of consecutive service
Qualifications for Surviving Spouses of Veterans
The surviving spouses of veterans must be able to get a COE to show their lenders before they can get a VA loan. To get a COE, you will generally need to have remained unmarried and meet one of the following criteria:
- The veteran spouse is missing in action; or
- The veteran spouse is a prisoner of war; or
- The veteran spouse was killed in the line of duty; or
- The veteran spouse died from a service-connected disability, and the surviving spouse did not remarry; or
- The veteran spouse was totally and permanently disabled and subsequently died, but the disability might or might not have been the cause of death.
Certificate of Eligibility for a VA Loan
To get a VA loan, you’ll need to get a Certificate of Eligibility (COE) from the VA. You can request a COE online by signing into VA.gov. If the VA already has the information it needs on file, it can automatically issue your COE. If it doesn’t, you’ll need to complete a Request for a Certificate of Eligibility form and submit it to the VA.
If you need to submit a request, City Creek Mortgage can help you. You’ll need to have the following documents available to ask for a COE:
- DD-214 for veterans
- Statement of service signed by a commanding officer for an active service member that includes your name, date of birth, Social Security number (SSN), date of entry to service, any lost time, and the name of the commanding officer signing the form
- DD-214 for former National Guard or Reserve member
- Veteran’s DD-214 and a completed VA Form 1817 if receiving dependency and indemnity compensation (DIC) for a surviving spouse
- Veteran’s DD-214 and a completed application for DIC if not receiving dependency and indemnity compensation plus the veteran’s death certificate and a copy of your marriage license as an unmarried surviving spouse
Getting Pre-Approved for a VA Loan
It’s important to get pre-approved for a VA loan so that you can present a stronger offer to a seller or agent for a home. Pre-approval for a VA loan is not the same thing as being approved, but it is a stronger indicator of your finances than a prequalification.
During the pre-approval process, your lender will take a close look at your eligibility, income, credit, and debts. The pre-approval process will involve the lender doing the following things:
- 1. Running a hard credit check
- 2. Asking active duty service members for a statement of service to verify income
- 3. Asking for employment verification documents, including W-2s and paystubs
- 4. Requesting verification of assets with bank statements, investment account statements, retirement statements, and others
- 5. Asking for your Social Security number and driver’s license number to verify identity
To prepare, take the following steps:
1. Pull your credit reports and credit score.
While VA loans have easier credit requirements, you still need to make sure you are in strong financial shape before you apply. You can get one free copy of each of your credit reports from the three major credit reporting bureaus, including Experian, Equifax, and Transunion, at annualcreditreports.com. Review your credit reports carefully, and challenge any inaccurate information.
You should also find out what your credit score is. Most lenders use FICO scores. If your credit score is low, take steps to try to improve it. You should also take a look at your debt-to-income (DTI) ratio and try to pay off some of your debts to lower your DTI.
2. Get Your COE
Once you’re satisfied with your credit, get a copy of your COE as described above. If you need help getting it, City Creek Mortgage can help you get a copy.
3. Gather Documents
Gather the following documents:
- Bank statements
- Pay stubs
- Proof of income and employment
- Current driver’s license
- Social Security card
4. Apply for Pre-Approval
Once your credit is squared away, and you’ve obtained your COE and gathered your documents, you can apply for preapproval for a VA loan with City Creek Mortgage. Once you are pre-approved, you can begin looking for a home.
Learn How Much House You Can Afford With a VA Loan
Getting an estimate of how much home you can afford is important when you’re preparing to apply for a VA loan. City Creek Mortgage offers a free home affordability calculator that you can use to estimate an affordable amount for a VA loan. You’ll need to enter your county, loan type, credit score, and down payment amount and then answer some basic questions. You will then receive an estimate of what loan amount you might qualify for.
Minimum Loan Requirements for a Utah VA Loan
Once you meet the service eligibility requirements, you’ll still need to meet the following minimum requirements to get approved for a Utah VA loan:
- Employment – You will generally need to show steady employment for two or more years
- Credit score – While the VA doesn’t have a minimum credit score, lenders will set their own. Many require minimum scores of 620, but it’s possible to get approved for a VA loan with a score as low as 500 to 619.
- DTI ratio – The ratio of your debt to income should be 41% or lower unless you have sufficient residual income.
- Loan limits – You won’t have loan limits if you have full entitlement, but you will if you have partial entitlement.
- Residual income – You’ll need to meet the minimum required residual income left over after you’ve paid your monthly expenses based on your home’s location and family size.
- Reserve funds – You might need to have reserve funds if certain circumstances apply, including separating from the military within the next 12 months, purchasing a multifamily property, or counting rental income as income to qualify for the VA loan.
- Occupancy – You must live in the home you purchase with a VA loan.
- Current on federal debt – If you have defaulted on federal loans, you’ll need to bring them current.
- Home appraisal – You’ll need to get the home appraised by a VA-approved appraiser.
The VA also has the following minimum requirements for a home:
- It must have enough space for cooking, living, sleeping, and sanitation
- It must meet all local building codes
- For homes in rural areas, they must have private road access
- Water must be directed away from the home with the drainage system
- It must have a sewage system in place
Positive Compensating Factors
If your application is on the edge, your lender can consider the following compensating factors to offset weaknesses:
- Having a great credit history
- Having little debt
- Showing long-term employment
- Receiving military benefits
- Having a low DTI
- Having significant cash on hand
- Making a large down payment
Negative Compensating Factors
The following factors can hurt your VA loan application:
- History of late payments
- Recent bankruptcy
- Recent foreclosure
- Unpaid collections
VA Loan Limits in Utah for 2023
Eligible service members and veterans who have full entitlement do not have home loan limits on mortgages of more than $144,000. If you have full entitlement and default on your VA loan, the VA will pay the lender 25% of the loan amount.
To have full entitlement, you must meet one of the three following criteria:
- You have never used your VA home benefit before; or
- You fully repaid a previous VA loan and sold the home; or
- You used your VA home benefit but had a short sale and then repaid the VA in full
If you have remaining entitlement, you will have a loan limit for a VA loan. You will be considered to have remaining entitlement if one of the following factors apply:
- You’re still repaying an active VA loan; or
- You fully repaid a previous VA loan and still retain ownership of the home; or
- You refinanced a previous VA loan into a different type of mortgage and still own the home; or
- You had a short sale with a previous VA loan and have not fully repaid the VA; or
- You transferred the deed to the property back to the bank to avoid foreclosure on a previous VA loan (deed in lieu of foreclosure); or
- You had a foreclosure on a VA loan in the past and didn’t repay the VA in full
If you have remaining entitlement, the VA will pay your lender up to 25% of the maximum county loan limits minus the amount of the entitlement you’ve already used.
The limits depend on the county in which a home is located. You can see the 2023 loan limits for Utah VA loans in the table below:
The loan limits above are not the maximum amount you can borrow. Instead, they are the maximum amounts the VA will pay if you default on your mortgage.
If I Have Full Entitlement, Does That Mean I Can Get Any Size of Mortgage I Want?
If you have full entitlement, the VA won’t set a loan limit on your mortgage. However, your lender will still need to approve your loan application based on how much you can afford. Your lender will determine the amount you can afford based on your credit history, assets, and income.
Talk to a Loan Officer at City Creek Mortgage
If you are looking for a home and believe you might qualify for a VA loan, you should reach out to the mortgage professionals at City Creek Mortgage. We can help you understand whether a VA loan is the right choice for you or if there might be a different loan that would fit your circumstances better. Call us today to schedule an appointment at 801-501-7950/
Looking to Explore Other Loan Types?
- Utah Conventional Loan: This is a loan that is not insured by the government. It has a lower down payment requirement than other types of loans, but it also has a higher interest rate.
- Utah Super Conforming Loan: This is a type of conventional loan that has a higher loan limit than a traditional conventional loan. It’s a good option for borrowers who need a loan amount that is above the conforming loan limit.
- Utah Jumbo Purchase Loan: This is a loan that is larger than the conforming loan limit. It’s a good option for borrowers who need a loan amount that is above the conforming loan limit.
- Utah FHA Loan: This is a loan that is insured by the Federal Housing Administration. It has a lower down payment requirement than other types of loans, but it also has a higher mortgage insurance premium.