It’s easy to understand the appeal of a home loan that offers up to 100-percent financing, relaxed qualification standards, and competitive interest rates. If you’re an aspiring homeowner who has heard about the advantages of mortgages provided by the home loans program of the U.S. Department of Veterans Affairs (VA), it’s only natural to ask: What are the requirements to qualify for a VA loan? After all, uncovering the answer to that question might be what helps you move from renting to owning the home of your dreams.
What Are the Requirements to Qualify for a VA Loan?
Despite their name, VA loans are not actually made by the VA. As Investopedia explains, the VA sets the qualifying standards and the terms of VA purchase loans. It also stands behind these loans with a partial guarantee. Who makes the loans? Private lenders do. They’re also allowed to add to the VA’s basic framework, which means that the requirements for VA loans can vary slightly from lender to lender. However, understanding the basic requirements for borrower eligibility, credit and income, and property eligibility can help you determine if a VA loan is a good fit for your situation.
VA loans aren’t an option for everyone. Eligibility for the program is earned with service. As the VA indicates, the exact requirements for eligibility depend on the nature of your service. However, service members in the following groups may qualify if they did not receive a dishonorable discharge:
- Active-duty service members
- National guard members
- Reserve members
- Surviving spouses
- U.S. citizens who served in the armed forces of a U.S. ally during World War II
- U.S. citizens who served as public health service officers, officers of the National Oceanic & Atmospheric Administration, or as merchant seamen during World War II
- Cadets at the United States Military, Air Force, or Coast Guard Academies
- Midshipmen at the United States Naval Academy
To secure a VA loan, you’ll need to obtain a Certificate of Eligibility (COE) from the VA. This document confirms your eligibility and provides your lender with information that they’ll need to process your loan application. The documentation that is required to apply varies depending on your service. The VA provides information on how to apply for a COE.
Credit and Income Requirements
Simply being eligible for a VA loan isn’t enough. As Credit Karma explains, borrowers must also demonstrate that they have sufficient credit and income to qualify for the loan that they’re seeking. Fortunately, the VA encourages lenders to take a relaxed approach to qualifying borrowers. When it comes to credit and income, what are the requirements to qualify for a VA loan? The VA has no minimum credit score, but lenders may have a minimum that they prefer. Lenders will also look at the borrower’s credit report, payment history, income. In addition, they’ll consider the borrower’s debt-to-income ratio. A DTI of no more than 41 percent is typically preferred. The lender wants to make sure that the borrower can truly afford the home.
VA loans are intended to help borrowers become homeowners. Their use is restricted to the purchase of primary residences. Therefore, you cannot use a VA loan to purchase a rental unit, business property, or second home. As NerdWallet reports, the home must also comply with the VA’s Minimum Property Standards, which are meant to verify that the property is safe, sanitary, and structurally sound. In addition, it must be appropriately valued. To confirm that it complies with the VA’s standards and is properly valued, the home must undergo a VA appraisal before the loan can be approved.
Could a VA loan be the right tool to help you reach your housing goals? Is there a better loan option that you haven’t discovered yet? Why not schedule a consultation with the loan experts at PrimeLending: Manhattan, Kansas, to find out? With our in-depth knowledge of the market, our firm commitment to friendly and personalized service, and our wide range of loan products, we would be happy to work with you to find the ideal loan for your specific situation. Contact us today to explore the possibilities.