VA Home Loans
Since 1944, Veteran (VA) Home Loans have offered exclusive benefits to veterans across the country. This special loan type usually requires little to no down payment, and often times even offers flexible payment features. The goal is to get veterans the house they deserve and desire, at a low cost, with reduced, fixed interest rates. Better yet, the Veteran’s Association insures a portion of all borrowed funds, meaning veterans are much less likely to default on a financing.
VA Eligibility Guidelines
Precisely, how does a borrower qualify for a VA Home Loan? A buyer must prove veteran status, and also fit the below criteria:
- Present a Certificate of Eligibility (COE) at time of application.
- The borrower must occupy the home as a primary resident directly following loan approval.
- Have good credit (a score of 620 or better).
- Provide substantial proof of income (earned or unearned).
- Only request a loan to cover the appraised property value. Any further associated costs, will be at the buyer’s personal expense.
- Surviving military spouses may also apply under specific circumstances.
Occupancy Requirements
To date, over 18 million VA Home Loans have not only been approved and disbursed, but they have also been backed by the Veteran’s Association. In order for this to continue happening, occupancy requirements have been set into place.
- Borrowers that qualify for VA Home Loans must be the primary residence of the new home.
- This loan is not approved for renting or leasing purposes (unless special circumstances have been discussed).
- Buyers need to move into their approved residence within 60 days of signing the agreement.
- Properties must be built to HUD standards or meet certification guidelines in a given state.
Property Types
Eligible VA Home Loan properties include:
- Single Family Residence (SFR)
- Condominiums or townhouses (as long as the entire property area has been approved by the VA).
- Refinancing on an existing home.
- New construction sites (for VA-approved builders with a 1-year home warranty in hand).
Credit History
Although numerous traditional loan lenders prefer a credit score of 700 or above, VA Home Loans allow veterans with a credit score of 620 or higher to apply for a loan. Loans are government backed, making them easier to pay off, with a much higher approval rate.
Income Requirements
Proof of income will be required in order to qualify for a Veteran Home Loan. Typically, the Debt to Income (DTI) should not exceed 41%.
For Example:
Annual income = $48,000.
Divided by 12: $48,000/12 = $4000
Monthly income = $4000
Multiply the monthly income by 0.41 – $4000 x 0.41 = $1640.
If the buyer’s debt obligation is not more than $1640, then they successfully qualify for VA loan.
Eligible borrowers should have ample funds remaining to cover personal expenses as not to struggle making monthly payments. If the veteran’s DTI does not meet the requirement percentage, it does not mean they are automatically declined for a loan. Candidates may still be considered, and this should be further determined by a well-versed mortgage professional.
Required Documents
When meeting with a mortgage professional the below documents should be present during an appointment:
- Certificate of Eligibility (COE)
- Proof of active military duty during specified periods for the minimum required time span.
- Recent proof of income.
- Estimated value of all personal properties and/or assets.
- Social security card
- Most recent residence (2 year history)
- Information on any other owned real estate
Down Payment
In most cases, veterans are required to make no down payment in order to be approved for a loan. This is one of the top benefits when it comes to qualifying for a VA Home Loan because no money is required out of pocket. However, in the event a veteran placed a bid on a home that exceeds its appraisal value, the buyer is responsible for those expenses that cannot be financed.
VA Home Loans Frequently Asked Questions
Is the surviving spouse of a deceased veteran eligible for the home loan benefit?
The unmarried surviving spouse of a veteran who died on active duty or as the result of a service-connected disability is eligible for the home loan benefit. In addition to this, a surviving spouse who obtained a VA home loan with the veteran prior to his or her death (regardless of the cause of death) may obtain a VA guaranteed interest rate reduction refinance loan.
What is a VA IRRRL? or VA Streamline Refinance?
An IRRRL can only be made to refinance a property on which you have already used your VA loan eligibility. It must already be a VA mortgage in order to do refinance with the VA Streamline.
What is acceptable proof of military service?
VA loan applicants must be prove their military service in order to receive a Certificate of Eligibility (COE). The Standard Form 180 Request Pertaining to Military Records is one of the most common ways for veterans to show proof of service. Surviving spouses also will need this form to secure the necessary proof that their husband or wife served in the military.
Veterans and their spouses can obtain the SF-180 by printing out a copy online or by requesting a letter. Individuals who choose the latter option will need to include the following information about the veteran: branch of service, full name, date of service, Social Security and service number, place and date of birth.
Keep in mind that by filling out the SF-180 puts veterans and surviving spouses one step closer to the COE and a new VA loan.
I have already obtained one VA loan. Can I get another one?
Yes, your eligibility is reusable depending on the circumstances. Normally, if you have paid off your prior VA loan and disposed of the property, you can have your used eligibility restored for additional use. Also, on a one-time only basis, you may have your eligibility restored if your prior VA loan has been paid in full but you still own the property.
In either case, to obtain restoration of eligibility and to prevent delays in processing, it is also advisable to include evidence that the prior loan has been paid in full and if applicable, the property disposed of. This evidence can be in the form of a paid-in-full statement from the former lender, or a copy of the HUD-1 settlement statement completed in connection with a sale of the property or refinance of the prior loan.
