If you are a member or former member of the military, one way you may be able to finance your dream home is through a VA loan. The Department of Veterans Affairs insures these loans so that lenders assume less risk if a borrower defaults. The VA loan program has some benefits over other types of home loans, but you need to be sure you’re eligible for the program first. Let’s take a look at the VA loan qualification requirements:
Your Military Status Must Be Covered
To qualify for a VA loan, you must fall into one of these four categories:
- An active duty service member
- A veteran of the military who’s been honorably discharged
- Member of the National Guard or Reserves
- An unmarried spouse of a military member who either died while on active duty or due to a disability that resulted from their service
Also, if you’re either active duty or a veteran, you should have served at least 90 consecutive days of active services at war, or 181 days of active service during peace. A National Guard or Reserves member must have at least six years of service to be eligible for a VA loan. There are some other exceptions, so if you’re not sure about your eligibility, talk to the VA office to double-check.
Apply for a VA Loan Certificate of Eligibility
The Certificate of Eligibility isn’t necessary when you start the loan process, but you’re going to need it to show proof of your eligibility before closing. You can apply for a Certificate of Eligibility through your VA-approved lender, online at the VA’s website, or by mailing in VA Form 26-1880.
Meet VA Loan Income Requirements
There’s no minimum income requirement for a VA loan. However, you do need to have an acceptable debt-to-income ratio (“DTI”). This DTI takes your monthly debts and divides it by your gross monthly income.
Another income-related requirement relates to residual income. This is the amount of income that’s left each month after all other expenses have been paid. This remaining amount should cover food, transportation, and other basic living costs. The amount of residual income that the VA requires to qualify for their program will vary by location and family size.
Keep in mind that although the VA doesn’t set credit score minimums, lenders may have specific credit score requirements.
Your House Must Be VA Appraised
During the VA loan process, you must have the house you wish to purchase appraised by a VA-approved appraiser. A home inspection doesn’t cover this requirement. The property must be reviewed against comparable homes to determine an accurate estimate of the home’s true value. It must also meet the VA’s Minimum Property Requirements, which the appraiser will check by reviewing the home’s condition. It might be necessary to rectify issues with the property’s condition before closing the loan.
If the appraiser determines that the property’s value is below the agreed-upon sale price, you have a couple of choices. You can submit a Reconsideration of Value to have the property reviewed again, pay the difference, or decline to purchase and look for something else.
Here's a calculator to help determine what your VA loan payments will be based on the purchased price, down payment, interest rate, military experience, and prior VA loan use. Now that you know more about the requirements for a VA loan, you might be ready to talk to a lender about next steps. Or you might still have questions about financing options. NASB can help you on both fronts, so give us a call at 855-465-0753, or click here for a free rate quote.
