Do I Qualify for a VA Loan?
According to the U.S. Department of Veterans Affairs, VA home loans have helped more than 20 million veterans, active duty service members, and surviving spouses across the country achieve the dream of home ownership. It’s praised by many for its low loan rates and lack of a down payment* or mortgage insurance**, made possible by the Department of Veterans Affairs. Since the VA guarantees a portion of each loan in the case of a default, lenders have the confidence to extend VA loan financing with exceptional rates and terms to those who meet the VA loan requirements. From service requirements to property requirements, here are some requirements for VA loans.
VA Loan Service Requirements
Whether you’re an active duty service member or a veteran, you’ll need to meet specific service requirements in order to meet eligibility for a VA loan. Service requirements fall into one of two categories: wartime and peacetime. Fortunately, potential homebuyers must fall into only one of the above categories in order to meet VA home loan requirements, meaning even those who served in peacetime are eligible. Although those who served during peacetime must have served longer than those who served during wartime, VA loans are open to both service levels.
You may be eligible for a VA home loan if you meet one or more of the following conditions:
- You served at least 90 consecutive days during wartime
- You served at least 181 consecutive days during peacetime
- You have more than six years of service in the National Guard or Reserves
- You are the surviving spouse due to a in the line of duty or as a result of a service-related disability
VA Loan Property Requirements
In addition to meeting service requirements, the home you intend on purchasing must meet specific property requirements, too. While homes come in all shapes and sizes, from townhomes and condos to single-family homes and new construction, potential homeowners who want to use a VA loan must focus on a select group in order to get final approval. Single-family homes are the standard for VA loans, and getting final approval shouldn’t be an issue. Although single-family homes are the norm, this isn’t to say that all other options are closed off. For example, condos and townhomes are eligible if the entire complex meets VA approval, and so are modular homes that are assembled on the homeowner’s property by a licensed contractor. If you’re interested in purchasing something beyond a single-family home, speak with a Mortgage Loan Originator about whether or not your property meets VA requirements.
Credit & DTI Ratio Requirements
Although the Department of Veterans Affairs doesn’t have strict credit score requirements in place for veterans, spouses, and military members who want to use this benefit, VA lenders typically do have additional requirements. Minimum credit score requirements vary from lender to lender, but typically hover around 620. As for income, the VA works with borrowers to ensure they can afford the mortgage they’re applying for. One way in which they do this is by computing a debt-to-income (DTI) ratio. This measure compares a borrower’s monthly debts and payments to his or her monthly gross income and, in most cases, shouldn’t exceed 41 percent. In some cases, lenders will allow for higher DTI ratios but, again, this can be different depending on the lender. In general, those with a higher DTI are at an increased risk of monthly expenses outweighing their income, which can be seen as a warning sign or higher risk to the lender. For this reason, a healthy DTI is one of the prime VA loan qualifications.
VA Loan Income Requirements
In addition to meeting credit and DTI ratio requirements, interested parties must also meet residual income requirements set forth by the VA. Although homebuyers aren’t required to reach any kind of threshold income, borrowers are expected to have stable, reliable income that will cover the monthly expenses associated with owning a home — including their mortgage payment. In addition, the VA requires that borrowers have a certain amount of income left over each month after all major expenses are paid. Referred to as residual income, this excess is meant to cover basic things, like food and transportation. The amounts vary by family size and part of the country, and is a major reason why VA loans have one of the lowest foreclosure rates out of all major lending options. By mandating residual income requirements, the VA virtually ensures that borrowers have a financial cushion in the event of an emergency.
Certificate of Eligibility
Although you don’t need a Certificate of Eligibility (COE) in hand to start the VA loan application process, it’ll help verify that the length and character of your service makes you eligible for VA home loan benefits. VA loans are for first-time and repeat buyers alike so, if you’ve used a VA loan in the past you may be eligible for a subsequent loan. If you think you qualify for a VA home loan, speak with a HomeBridge Mortgage Loan Originator today.
*100% financing up to county loan limits may be available for purchase loans or 1-unit cash-out refinances. Cash-out not available in Texas. Minimum FICO score requirements apply.
**Most VA loans will require a funding fee.
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