Monday, March 30, 2020

VA Home Loans Eligibility Requirements

va loans

Homebuyers who want to get a VA loan need to meet certain requirements set by the Department of Veteran Affairs (VA) and the lender they work with to get approved for the loan. Apart from the requirements set by the VA, lenders have a separate set of eligibility criteria for potential VA homebuyers.

Let’s have a look at those requirements in detail

Minimum Service Requirements to be Eligible for VA loans

According to the Department of Veteran Affairs, you are eligible for VA loans

  •       If you are currently serving and have completed 90 days of continuous active duty
  •       If you have served 90 days or more during world war 2, Vietnam or Korean war
  •       If you have served 181 days or more during peacetime
  •       If you have spent 6 years or more in the National Guard or Reserves
  •       If you have been discharged from service as a result of service-related disability, there is no minimum service requirement for you and you are eligible to get approved for VA loans
  •       If enlisted in the post-Vietnam era and have completed 2 years of service

If you were discharged with a dishonor from the service, you are not eligible for VA home loans even if you fulfill the above criteria 

Eligibility Criteria for Spouses

The spouses of veterans or service members are eligible to apply and get approved for VA-approved home loans, provided that their spouses

  •  Have died while in service
  •  Died from a service-related disability
  • Is missing in action
  • Is a prisoner of war
  •  Spouses can still get qualified for VA loans if they get Dependency and Indemnity Compensation (DIC) benefits

Getting a Certificate of Eligibility (COE) for VA Home Loans

A certificate of eligibility formally declares that you are eligible to apply for a VA-authorized home loan and you meet the VA service criteria.

While it is not necessary to have your COE (Certificate of Eligibility) in your hand while you are applying for a VA home loan but it is an important part of your VA loan eligibility. It provides your lender the guarantee that you are qualified for the VA loan benefits.

Usually when you go to a lender to apply for a home loan, they obtain your COE through the automated VA system.

Documents required to get COE

The verification of your service to obtain COE is through a DD form 214 for regular military members and the NGB form 22 and NGB form 23 for National Guard and Reserves.

If you are an active military member, you will need a statement of service signed by the adjutant, personnel office, or the unit commander or headquarters.

How to apply for a COE

There are three common ways to apply for a COE for a VA-approved home loan.

  1. Apply via a VA-approved lender
  2. Apply through VA online e-benefits portal
  3. Apply through an email with VA form 26-1880

If you want to get your COE immediately to fasten your home loan process, you should contact  a verified home loan specialist. They complete the process of your service verification within minutes and make sure that your home buying process moves forward smoothly.

Basic Requirements

If you fulfill any of the above criteria you may still apply for VA loans. As you might know that the VA doesn’t provide loans to the veterans, but private lenders does. So in order to get approved for veteran-authorized loans, you must also fulfill the basic requirements that are mentioned below

  •  The veteran must occupy the property as a home or intend to occupy it in a certain period of time after signing the loan contract
  • The loan should be for a legitimate purpose
  •  The veteran must be a satisfactory risk to the lender
  • The veteran and their spouse should have a stable source of income so that it can be verified that they will be able to pay their monthly mortgage payments on time
  •   Any other additional requirements specifically asked by the private mortgage lender

It is important to understand that private lenders have their own set of criteria to judge if they can trust you with the mortgage money or not. Different lenders have different criteria and different minimum credit score requirements. So if you are being rejected from one lender, it is possible that you may qualify with another lender.

Here are some common requirements that you will need to meet to be eligible for a VA home loan

Credit Score

The VA doesn’t impose a minimum credit score requirement but most private lenders do. Most mortgage lenders prefer a credit score of at least 620 but it vary by lender. Some lenders may approve you with a credit score in the 500s.

Debt to Income (DTI) Ratio

Lenders compute your debt to income ratio to identify how easily you can make your monthly mortgage payments. This ratio is calculated by dividing your monthly gross income with your current monthly debt and other payments.

Most lenders prefer a DTI of 41% or less but it also vary with the lender. Some lenders will may approve you for even a 50% DTI ratio.

Funding Fees

Funding fee is a one-time payment that is added to your closing costs. It ranges from 1.25% to 3.30% of your loan amount that you have borrowed from the lender. It varies depending if you have paid any down payment or not.

Residual Income

Residual income is the monthly income that remains in your pocket after all of your debts (credit card etc.) and bills are paid. It is a requirement by the VA and is measured to ensure that borrowers will have enough money to cover basic living costs after paying off the monthly mortgage payments.

Minimum Mortgage Requirements

This requirement comes directly from the VA and not the lender. It is to ensure that the house you are going to buy is structurally sound, is sanitary and safe. The VA issues a complete set of rules that need to be followed while buying a home with VA loans.

How to Apply for a VA Home Loan

The VA home loan process typically takes 30 to 45 days to complete once you are under the contract on a home. Here are the 4 basic steps that you need to know in order to apply for a VA home loan

  1. Learn about the basic eligibility requirements (mentioned above) for a VA home loan
  2. Find a VA-approved mortgage lender and start your VA loan application
  3. Get your certificate of eligibility on your own or through your mortgage lender
  4. Finalize you loan application and provide all the necessary documents to your lender including financial information, tax returns and W2s

If you need guidance regarding which loan product is best for you or have any other query regarding home loans, our licensed mortgage lenders are here to guide you with every step. Feel free to contact us any time!

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