VA Loan - Trying to find finance a home while transitioning from Active Duty to VA Retired 100% Disability

Asked by gilligan2404, Omaha, NE Thu Nov 15, 2012

Trying to buy a home in Omaha. The lender we are working with (Military Family Home Loans) has pre-approved us and we put an offer on a home. The buyers accepted and we continued with inspections and the paperwork to close on the home. The lender issued the appraisal two days ago and tomorrow the appraisal will take place. The lender called us today and said that they cannot finance us with out proof of income. I will not be separating until January 28, 2013, but start my terminal leave December 9, 2012. We are trying to close on the home on December 15, 2012. I will be receiving pay throughout my transition from active duty to medically retired with 100% disability (2 months maxim from date of separation 01/28/2013). They want a letter in writing of a date and an exact amount I will be receiving. As you may know that is not something our government does. When they get to it, they get to it. Is there anything that you can suggest. Please any advise is appreciated. Thank you

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, ,
Fri Nov 16, 2012
Hi Gilligan 2404,

Here are the VA guidelines:

Below is an excerpt from chapter 4 which deals with income requirements.

a. Underwriter’s Objectives

Identify and verify income available to meet:

• the mortgage payment,
• other shelter expenses,
• debts and obligations, and
• family living expenses.

Evaluate whether verified income is:

• stable and reliable,
• anticipated to continue during the foreseeable future, and
• sufficient in amount.

Only verified income can be considered in total effective income.

In addition, identify servicemembers who are within 12 months of release from active duty or end of contract term. Find the date of expiration of the applicant’s current contract for active service on the LES (for an enlisted servicemember). For a National Guard or Reserve member, find the expiration date of the applicant’s current contract.

If the date is within 12 months of the anticipated date that the loan will close, the loan package must also include one of the following four items, or combinations of items, to be acceptable:

• documentation that the servicemember has already re-enlisted or extended his/her period of active duty to a date beyond the 12-month period following the projected closing of the loan, or
• verification of a valid offer of local civilian employment following the release from active duty. All data pertinent to sound underwriting procedures (date employment will begin, earnings, and so on) must be included, or
• a statement from the servicemember that he/she intends to reenlist or extend his/her period of active duty to a date beyond the 12 month period, plus
• a statement from the servicemember’s commanding officer confirming that:
- the servicemember is eligible to reenlist or extend his/her active duty as indicated, and
- the commanding officer has no reason to believe that such reenlistment or extension of active duty will not be granted, or
• documentation of other unusually strong positive underwriting factors, such as:
- a downpayment of at least 10 percent,
- significant cash reserves, and
- clear evidence of strong ties to the community coupled with a nonmilitary spouse’s income so high that only minimal income from the active duty servicemember is needed to qualify.

Analysis: Base Pay
Consider the applicant’s base pay as stable and reliable except if the applicant is within 12 months of release from active duty.

• Analyze the additional documentation submitted.
• If the applicant will not be reenlisting, determine whether:
- the applicant’s anticipated source of income is stable and reliable, and/or
- unusually strong underwriting factors compensate for any unknowns regarding future sources of income.

It sounds to me like you may have a very conservative underwriter. If you have your VA awards letter showing what your disability pay will be, that should be good enough.
1 vote
Monica Lang, Agent, Omaha, NE
Mon Dec 17, 2012
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I would love to help you find the perfet new home to fit your needs.
0 votes
Kelly Gitt, Agent, Omaha, NE
Thu Nov 15, 2012
There are 2 separate issues here: 1. If no one can provide documentation of your retirement pay or is willing to write a letter, then you may be out of luck. I would lean heavily on the guidance of those that are outprocessing you as they are your best resource to make a seamless transition into civilian life. 2. Regarding your VA loan, while on active duty I would imagine you currently do not have disability. This is an outstanding loan that allows a Buyer to go 0 down. Therefore when you use your VA loan you pay an upfront funding fee so for example if the purchase price is 100k you will finance a little over 102k so you are a little top heavy when you close if you pay market value for the home. The fee increases each time you use the loan. When you have over 10% disability, your funding fee is waived. I too am a veteran & have used my loan several times & have maximized the benefit because I also have disability so my funding fee has always been waived. Personally if it were me, I would not buy a home until after you are retired unless you are taking a pay cut & would qualify for less, affecting your overall purchasing power. If your retired pay is equal or greater than active duty, it would be a short term loss for a long term gain because of the benefit of waiving the funding fee.
0 votes
USAA referred us to Military Family Home Loans. No one has anything good to say about them. It seems they are a call center environment, that is undermanned who outsource underwriters. We are now working with security national bank and considering Centris FCU.
Flag Sat Nov 17, 2012
Thank you also for your service! I wish you the best & would agree I think your lender is pretty conservative. There's got to be a way around that by providing your documentation of disability.
Flag Fri Nov 16, 2012
I am going to be 100% disabled. That is just over $3000 a month (Veteran with Spouse & Child) of non-taxable income. I have my med-board paperwork, separation paperwork and VA-Rating. I do not understand why they are being so strict when the house payment is under $900 a month and I have good credit. Thank you for your response and service to our country.
Flag Thu Nov 15, 2012
, ,
Thu Nov 15, 2012
Does your certificate of eligibility say how much your disability income is, or do you have a disability award letter from the VA yet on how much you will be receiving in disability income? Do you have sufficient assets to cover your payments between now and when you will start to receive the disability income?

Shane Milne | Lending in all 50 states | NMLS #81195
0 votes
The funding fee being waived shouldn't be an issue - as either you are exempt from it or you are not. If you are exempt from it, then it clearly says on the certificate of eligibility. But if you get the VA funding fee waived, then the loan officer knows you are getting disability income so it may be related in that regards.

But if you have your disability award letter - what are they asking for then? The proof of how much you'd receive for the 2 months between your retirement and when the disability income would begin?

You could try talking to a manager, but the underwriter is the one who is requesting this, most likely to be able to sell the loan to the eventual investor. However the manager may be able to sell it to the investor after you begin receiving your disability income pay, which if it's just for 2 months, then the manager may OK servicing the loan for that amount of time. It is their call though. Definitely let them know you have assets & other income to pay.
Flag Thu Nov 15, 2012
Hi Shane,
I do have my disability award letter, that is what the loan is being based off. Yes we will be able to pay, as my husband works as well, but is not on the loan. Also I will be getting paid from the Air Force until the VA Starts paying. I just cannot see why this is such an issue. The estimated house payment is going to be under $900. Also I wanted to add that the loan officer was very helpful until we mention that we want to have the funding fee waived. That is when this issued arrived. Should I try to talk to a manager? Thank you again for such a prompt response. This is nerve wracking. Your advise is really appreciated.
Flag Thu Nov 15, 2012
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