Backed by the U.S. Department of Veterans Affairs and issued by private lenders, VA loans have allowed scores of aspiring homeowners to purchase their dream homes. Is a VA loan an option for you? Learning about VA home loan requirements is the first step in discovering whether or not this type of mortgage is right for you.
VA Home Loan Benefits
As Zillow makes clear, VA loans come with some incredibly attractive benefits. With a VA loan, you will enjoy all of the following:
- You’ll get a competitive interest rate.
- There’s no requirement for a down payment.
- Private mortgage insurance is not needed.
- Any funding fees can be financed.
- Closing costs are limited and may be paid by the seller.
- There’s no penalty for paying the loan off early.
- The loan is assumable, which can be a great selling point if you decide to put your home on the market later.
- If you find yourself struggling as a result of a temporary financial difficulty, you can turn to the VA for assistance.
VA Home Loan Requirements
Since its inception in 1944, the VA loan program has provided some 22 million veterans with loans, and evidence suggests that that number will continue to grow. As the Chicago Tribune reports, more than $179 billion was provided through more than 707,000 loans that funded new purchases or refinanced old loans in 2016, making it a record year for VA loans. Clearly, VA loans are a fantastic financing option, but not every borrower or every property is eligible. What do you need to know about VA home loan requirements?
VA loans are for service members, veterans, and their families.
VA loans are a benefit earned through military service, so not everyone will qualify. To utilize the home loan entitlement, veterans, active-duty personnel, reservists, members of the National Guard, surviving spouses, and individuals who work or have worked with certain organizations must meet specific eligibility requirements. Once you have determined that you are eligible, your next step should be securing a Certificate of Eligibility. This document provides a lender with evidence that you are eligible for a VA loan, and it can be obtained online, through the mail, or through your lender.
Borrowers must have the financial resources to qualify.
Earning a VA entitlement affords you the opportunity to apply for a VA loan, but it does not guarantee that you’ll get one. You must also have the income and credit history to qualify for the loan. As Military.com explains, the VA suggests that borrowers should have a debt-to-income ratio that is no more than 41 percent and sufficient residual income to cover typical living expenses, but it’s left to each participating lender to determine exactly what they will accept. For example, you may have heard that there is no minimum credit score for a VA loan. This is true in the sense that the VA does not have a credit score requirement, but individual lenders do often have a minimum score that they will accept. What if your credit is less than stellar? You may still be able to secure a VA loan. Because the VA’s backing reduces the inherent risk involved in the loan, lenders are often willing to work with borrowers with imperfect credit.
Owner occupancy is a necessity.
Are you hoping to buy a rental property or a second home? Even if you have earned a VA entitlement, you won’t be able to use it to secure a VA loan in this situation. As Investopedia points out, VA loans can only be used to purchase property for a single purpose. These loans must be used to fund the purchase of a home for your personal occupancy. However, it’s worth noting that buying a home with a VA loan doesn’t mean that you have to live in the home for as long as you own it. While you must intend to make your home there at the time of the purchase, if you choose to relocate after you’ve lived there a while, then you can sell the house, keep it as a vacation home, or rent it out.
The property must also meet certain requirements.
Eligibility isn’t just a concern for the borrower. A property must also meet certain requirements before it can be purchased with a VA loan. To comply with the guidelines laid out in the VA Minimum Property Requirements, a property must be a single, marketable piece of real estate that is at least 75 percent living space and contain space for living, sleeping, cooking, and dining. A bathroom is a necessity, and all mechanical systems must be appropriately sized and in good working order. There must be separate service shutoffs for water, sewer, gas, and power. In addition, the structure and its roof must be sound. Any evidence of issues like mold, dry rot, fungus, decay, leaks, broken windows, peeling paint, wires, continuing settlement, or a pest infestation is unacceptable.
If you have questions about VA home loan requirements, 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!