Offered through the U.S. Department of Veterans Affairs (VA), VA loans are an appealing option for many prospective homebuyers. Because the VA stands behind these loans, they tend to come with attractive terms. In fact, securing this form of financing can free you from the worry of amassing a down payment or paying private mortgage insurance. It could also help you enjoy lower interest rates, resulting in substantial financial savings over the lifetime of the loan. So if you believe you may be eligible for this type of mortgage, we encourage you to learn how to qualify for a VA loan before you purchase your next home.
How to Qualify for a VA Loan
The VA does not provide home loans directly. It works with private lenders to offer excellent terms on mortgages that meet the requirements of its VA loan program. Investopedia reports that some 22 million individuals are eligible to take advantage of this form of financing. To do so, borrowers must meet certain requirements in regard to their personal eligibility, their financial situation, the nature of the property that they are purchasing, and the occupancy of that property. If you’re an aspiring homebuyer who plans to use this type of loan, understanding how to qualify for a VA loan can help smooth your path to homeownership.
Entitlement Eligibility
Who is eligible to apply for a VA loan? This entitlement is available to the majority of veteran, reservist, and active-duty service members of the military and the National Guard. Some military spouses may also qualify. As the VA explains, the time required to earn this entitlement varies depending on the circumstances of your service. For those who are on active duty during a period of war, the entitlement typically begins in 90 days. Those on active duty during peacetime normally must serve at least 181 days to qualify. Reservists and members of the National Guard who are not called for active duty generally must serve six years to earn the entitlement.
Financial Criteria
VA loans offer excellent interest rates and require no down payment or private mortgage insurance. While these factors can increase a buyer’s purchasing power, the VA does not want to encourage those it serves to overextend themselves. As Military.com reports, individuals applying for a VA loan must have an appropriate debt-to-income ratio. Successful applicants will have sufficient income, credit, and financial resources for the purchase.
Property Suitability
Just as there are limits on who can access the VA home loan entitlement, there are rules about the type of property that a VA loan can be utilized for. According to the VA, you can use a VA home loan to accomplish any of the following:
- Buy a home, a manufactured home, a condo in a VA-approved project, or a suitable building lot
- Purchase and improve a home
- Build a home
- Finance specific types of home improvements
- Refinance an existing mortgage
Occupancy Matters
The issue of occupancy also plays a key role in whether or not a property meets the requirements for a VA home loan. According to Military.com, VA loans are only used to finance the purchase of an owner-occupied property. If you intend to purchase a rental property or a vacation home, using a VA home loan isn’t an option. While there are certain circumstances that can allow you to turn a home that you bought with a VA loan into an investment property or second home, at the time of the purchase, you must intend for the property to be your primary residence.
Securing a VA Loan
Because VA loans are offered by private lenders, the steps involved in securing a VA home loan are very similar to those required to obtain a traditional mortgage, but there are a few differences. If you plan to use a VA loan to purchase a home, the VA suggests that you do the following:
- Verify that you are eligible for this entitlement.
- Apply for a Certificate of Eligibility.
- Select a lender who offers VA loans.
- Choose a realtor familiar with VA loans, and begin shopping for a home.
- Find a property that you want to buy. Then, sign a purchase agreement that includes a VA-option clause.
- Apply for a VA loan. Be prepared to furnish the lender with documentation regarding your income, assets, and debts.
- Await the appraisal. Before extending a VA loan, lenders must arrange for the property to be examined by a VA-approved appraiser to verify that it has sufficient value.
- Stay in contact with your lender. You may have to provide additional information. If your application is approved, you will need to make arrangements to attend the closing.
VA home loans can be a fantastic financing option for eligible buyers. If you have questions about how to qualify for a VA loan, contact PrimeLending: Manhattan, Kansas. Every year, we help thousands of veterans and active-duty members of the military buy or refinance their homes through the VA home loan program. With our assistance, you can take advantage of the many benefits of a VA loan while saving money due to our lack of lender fees. We offer 100% financing with competitive interest rates – no down payment or PMI required! To learn more, please give us a call at 785-560-3011 or contact us online. It’s our turn to serve you!