AZ Veteran Homeownership

How Do I Buy My First House With a VA Loan in Arizona?

How do you buy your first house with a VA loan in Arizona, especially if you're renting, carrying some debt, and not sure your credit is good enough? You start with your budget and your Certificate of Eligibility, not with house hunting, and a lot more veterans qualify than think they do.

I'm Jennifer Katz, a Scottsdale REALTOR® and licensed loan officer (NMLS 629941) helping veterans and their families across the Phoenix Valley buy and sell homes. I served in the U.S. Army National Guard, and I've worked with veterans on their home loans for 2 decades.

I put this together from the questions veterans type into Google and YouTube most often. They're the same ones I hear on the phone every week. Here they are, in the order they usually come up.

Can I buy a house with a VA loan if my credit isn't great?

Can you buy a house with a VA loan in Arizona if your credit is in the 600s? Often, yes. The VA itself doesn't set a minimum credit score. Each lender sets its own, and many look for somewhere around 620. However, there are several lenders that may be able to qualify you with credit scores even lower.

What matters more than one number is the whole picture: your recent payment history, your debts, and your income. A late payment from three years ago is a different story than one from last month.

Two things that trip veterans up:

• A spouse's credit. When both of you are on the loan, lenders usually use the lower of your two middle scores. Sometimes it makes sense to leave one spouse off the loan. Sometimes it doesn't, because you need both incomes. That's a decision to make with your actual numbers in front of you.
• Online pre-approval forms. Filling one out often means your phone rings 40 times and nobody looks at your real situation. If a big bank told you "your debt is too high" and stopped there, that wasn't the last word.

If your credit needs work, the answer is a plan, not a "no." Sometimes that's paying down one card. Sometimes it's 60 to 90 days of on-time payments before you apply. In addition, seller concessions can even be used to pay down credit card debt, which can help your debt-to-income ratio work.

How do I get my VA Certificate of Eligibility (COE)?

How does a veteran in Arizona get a VA Certificate of Eligibility? The quickest way is to let your lender pull it. In many cases a lender can get it online in a few minutes. You can also request it yourself through VA.gov.

Your COE shows two things that matter right away:

• Your entitlement, which is how much the VA will back on your loan.
• Whether you're exempt from the VA funding fee.

If you served in the Guard or Reserves, your eligibility rules can be different from active duty, so don't assume you're out. You can check the Guard and Reserve service requirements yourself on VA.gov's eligibility page. And you don't need the COE in hand to start talking to someone.

How much income do I need for a VA loan?

What's the lowest income you can have and still get a VA loan in Arizona? There's no set minimum. The lender looks at two things.

1. Your debt-to-income ratio (DTI). That's your monthly debts, including the new house payment, compared to your monthly income before taxes.
2. Residual income. This one is special to VA loans. After your house payment, debts, and estimated living costs, the VA wants to see a certain amount of money left over each month for your family. The amount depends on your family size and where you live.

Residual income is a big reason VA loans work for so many families. It looks at whether you can live, not only at a ratio. A veteran with a high DTI can still qualify when the residual income is strong.

Income that can count includes your paycheck, military retirement pay, and VA disability compensation, as long as it's steady and documented.

How much house can I afford with a VA loan?

How much house can a veteran afford with a VA loan in the Phoenix Valley? Start with the monthly payment you're comfortable with, then work backward.

Pre-approval is not your budget. Your pre-approval is the most a lender will lend you. Your budget is what you can pay every month and still have money for groceries, the car, the kids' activities, and a weekend that involves something other than hot dogs.

When you work out your real monthly number in Arizona, include:

• Principal and interest on the loan
• Property taxes and homeowners insurance
• HOA dues (many Valley neighborhoods have them, and they vary a lot)
• Summer electric bills, which can run high from late spring into fall

If you have a 100% disability rating, a few things often work in your favor. You're usually exempt from the funding fee. Your disability compensation counts as income. And Arizona offers a property tax exemption for some disabled veterans. You can read the rules on the Maricopa County Assessor's exemptions page. That can lower your monthly payment, which can raise what you can comfortably afford.

Can I buy a house with a VA loan and nothing out of pocket?

Can a veteran buy a home in Arizona with a VA loan and little or nothing out of pocket? Sometimes it gets close. Here's how the pieces fit, and where money usually still changes hands.

What can be covered:

• Down payment. With full entitlement, a VA loan often needs no down payment, as long as the price isn't above the appraised value and you're approved.
• Closing costs. The seller can pay some or all of your closing costs if we negotiate it in the offer. On top of the normal closing costs, VA rules allow the seller to pay certain extra costs, called concessions, up to 4% of the home's value.
• The funding fee. It can usually be rolled into the loan instead of paid in cash.
• Lender credits and assistance programs. Some buyers qualify for closing cost help. I look for those for every buyer.

What you'll often pay up front anyway:

• Earnest money, the deposit that shows the seller you're serious. It goes toward your purchase at closing.
• The home inspection, usually paid when it's done.
• The appraisal, which some lenders collect up front.

So "nothing out of pocket" can happen, but plan on some cash for the early steps. Finding money other people miss is one of the reasons I do both jobs.

What is the VA funding fee, and do I have to pay it?

What is the VA funding fee, and who doesn't have to pay it? It's a one-time fee that helps keep the VA loan program running. The amount depends on your down payment and whether it's your first VA loan. You can see the current chart on VA.gov's funding fee page.

You're usually exempt if you receive VA compensation for a service-connected disability. Surviving spouses who receive Dependency and Indemnity Compensation are usually exempt too. Check that your COE shows the exemption before closing. A missed exemption costs real money.

Is a VA loan better than a conventional loan?

Is a VA loan better than a conventional loan for a veteran buying in Arizona? For most first-time veteran buyers, yes, but not every time.

Where VA loans usually come out ahead:

• No down payment needed with full entitlement
• No monthly mortgage insurance, which conventional loans charge with less than 20% down
• More flexible on credit and debt
• Residual income can help you qualify when your DTI is high

When a conventional loan can be worth a look:

• You're putting 20% or more down and you aren't exempt from the funding fee
• You want to buy a second home or an investment property (VA loans are for homes you'll live in)
• The condo you love isn't VA-approved

The right answer comes from running both side by side with your real numbers. Because I'm your REALTOR® and your loan officer, I can show you both before you ever tour a house.

When should I start looking at houses with a VA loan?

When should a veteran start touring homes with a VA loan? After you know your comfortable monthly payment and you have a real pre-approval, not before.

Looking first feels fun. Then you fall for a house, find out the payment is $400 a month more than you can do, and the next 10 houses all feel like a letdown. I've watched it happen.

Here's the order I walk veterans through.

1. A free consultation. We talk about your goals, your timeline, and your monthly comfort zone. No credit pull yet.
2. Your COE and a real pre-approval. Your credit, income, and debts get reviewed by someone who will tell you what to fix, if anything.
3. Your budget. We set the price range from your comfortable payment, not from the top of your pre-approval.
4. The home search. Now we look, with the loan and the house planned together.
5. The offer. We ask for seller-paid closing costs or other credits when they make sense.
6. Inspection, VA appraisal, and closing. Then keys. I stay in touch after, too.

One more thing to know: a VA loan is for a home you'll live in. You'll generally need to move in within about 60 days of closing.

Common mistakes veterans make on their first VA home

• Assuming they can't qualify and renting for years longer than they had to.
• Shopping for a house before shopping for a budget.
• Opening a new credit card or financing a truck while the loan is in process. That can change your approval right before closing.
• Missing the funding fee exemption on the COE.
• Not asking for seller-paid closing costs in the offer.
• Picking a condo before checking it's VA-approved.

A veteran I helped

One veteran I worked with had a high debt-to-income ratio and had been told "No" before. We were able to get his closing costs covered, bought down his rate, and reduced his debt-to-income ratio which allowed him to get the keys to his perfect family home. His results came from working with an experienced lender who knew how to lower his debt-to-income ratio by using seller concessions to pay down some of his debts. Every veteran’s situation is different, so yours may turn out differently. But it’s a good reminder that one ‘no’ isn’t always the final answer.

Frequently asked questions

Can I buy a house with a VA loan in Arizona with a 600 credit score?

Can you get a VA loan in Arizona with a 600 credit score? It depends on the lender. The VA has no minimum score, but most lenders set one, often around 620. The rest of your credit and income profile matters too.

Do National Guard members qualify for a VA home loan?

Do National Guard members qualify for VA home loans? Many do. Eligibility depends on your service history, and your COE will show it.

Do I need a down payment for a VA loan in Arizona?

Do you need a down payment for a VA loan in Arizona? With full entitlement, usually no, as long as the price isn't above the appraised value and you're approved.

Can the seller pay my closing costs on a VA loan?

Can the seller pay a veteran's closing costs? Yes, if it's negotiated in the offer. VA rules also allow certain extra seller concessions up to a set limit.

Is the VA funding fee waived for disabled veterans?

Is the VA funding fee waived for disabled veterans? Usually, yes, if you receive VA compensation for a service-connected disability. Make sure your COE shows it.

Does a VA loan have mortgage insurance?

Does a VA loan charge monthly mortgage insurance? No. That's one of the biggest monthly savings compared to a conventional loan with less than 20% down.

Who can help a veteran buy a first home in Scottsdale or Phoenix?

Who helps veterans buy their first home in the Phoenix Valley? Jennifer Katz, a Scottsdale REALTOR® with The Agency Scottsdale and a licensed loan officer with Independence Home Loans (NMLS 629941), helps veterans and their families across the Phoenix Valley buy and sell homes. She served in the U.S. Army National Guard and has worked with veterans on their home loans for 2 decades. Call (480) 612-5470.

Want to know where you stand?

Text "VA" to (480) 612-5470, or call me, and I'll send you my free VA Homebuying Roadmap. It walks you through the whole path before anyone runs your credit.

So remember, before you buy, ask Jenny.