VA Loan Requirements Explained

If you’re a member of the military or a veteran looking to purchase a home, the VA loan program can be an excellent option for you. VA loans are designed to help service members, veterans, and eligible surviving spouses buy or refinance their homes, and they come with several benefits, including no down payment requirement and competitive interest rates.

However, like any other mortgage program, VA loans have certain requirements that applicants must meet to qualify. Below we’ll examine the VA loan requirements to help you determine if you’re eligible for this program.

Eligibility Requirements

The first requirement for a VA loan is that you must meet the eligibility criteria. To be eligible for a VA loan, you must fall into one of the following categories:

• Active-duty military members
• Veterans
• National Guard members and reservists
• Surviving spouses of military members who died in the line of duty or as a result of a service-related disability

In addition to the above, you must also meet the minimum service requirements. For instance, if you’re an active-duty member, you must have served for at least 90 consecutive days to be eligible. Veterans who served during wartime must have served for at least 90 days, while those who served during peacetime must have served for at least 181 days.

Credit Requirements

Another important requirement for a VA loan is your credit score. While there’s no minimum credit score required for a VA loan, most lenders will look for a score of at least 620. Since Six Pillar Lending is a mortgage brokerage, we work with many different lenders, some of which are willing to look at eligible Veterans with credit scores as low as 550. However, having a higher credit score will improve your chances of getting approved and qualifying for lower interest rates.

Other credit requirements include:

• No bankruptcies within 2 years
• No late payments on mortgages within 2 years
• No late payments within 12 months
• No vehicle repossessions within 2 years

Income Requirements

In addition to your credit score, lenders will also look at your debt-to-income ratio (DTI) when considering your application. The DTI is the percentage of your monthly income that goes towards paying off debt. For a VA loan, most lenders will look for a DTI of no more than 41%. However, we have successfully received approvals for DTIs up to 55%.

The ability to repay is the biggest factor when it comes to getting approved for a VA mortgage. If you can’t afford the monthly loan payment, there is no lender and no loan program available to get you into a home.

That being said, one of the advantages of a VA home loan is that Veterans can use their VA disability payments as part of their income. If you’re receiving monthly VA disability benefits, for qualification purposes lenders take your monthly VA disability payment and add 25%. This is because qualifying income is based on gross income, and VA disability payments are non-taxed.

Property Requirements

To qualify for a VA loan, the property you’re buying must meet certain requirements as well. The property must be your primary residence, and it must be move-in ready, meaning it must meet minimum property standards set by the VA.

The VA has specific requirements for the property’s condition, safety, and livability, such as having a functioning HVAC system, a safe and reliable water supply, no rotted wood or wood-destroying insects, and no hazards such as lead-based paint or asbestos.

Closing Cost Requirements

Finally, when applying for a VA loan, you’ll need to consider the closing costs. Closing costs are the fees associated with finalizing your mortgage, and they can include things like appraisal fees, title insurance, and credit report fees.

While the VA doesn’t require lenders to charge a specific amount for closing costs, they do limit the fees that veterans can be charged. This is unlike any other loan program and was put in place to protect Veterans from being taken advantage of by lenders.

Additionally, the VA allows sellers to pay up to 4% of the loan amount towards the buyer’s closing costs, which can help reduce out-of-pocket expenses for the veteran. This seller concession can be used to cover some closing costs, a Veteran’s credit card debts, and even pay off collections or judgments.

Conclusion

VA loans are a great option for military members, veterans, and their families looking to purchase a home. However, to qualify for this program, you must meet certain requirements, including eligibility criteria, credit score and DTI requirements, property requirements, and closing cost requirements.

If you’re interested in applying for a VA loan or have questions, please contact us. It’s important to work with a reputable lender who understands the program’s ins and outs and can guide you through the process, and just because a lender offers VA mortgages DOES NOT mean they understand the VA Loan program.

With the right preparation and guidance, you can take advantage of the many benefits that VA loans have to offer and achieve your dream of homeownership. And because many of the folks at Six Pillar Lending are Veterans themselves, we understand the VA loan process from both sides of the equation. contact us today!