VA Loans Part 2: Basic Requirements

By Brian Willingham, Senior Mortgage Banker

Last week we discussed the basics and benefits of a VA home loan and I promised to come back this week to discuss the qualifications and basic requirements of VA loans.  

Who qualifies for a VA loan?

In general, active duty members or veterans of the United States Armed Forces, and some government agencies, are eligible for VA home loans provided they have met some minimum service times and did not receive a dishonorable discharge from service.  The minimum time required to qualify for a VA loan depends on when you served. Click here for the full list.   

For members of the National Guard or Reservists, a minimum of six years of service in the Guard/Reserves is required.  However, periods of active duty service during wartime or peacetime could qualify a member of the National Guard or Reserves with less than six years of service.    

How do I know if I qualify?

The first step in obtaining qualification for a VA Home Loan is to obtain a Certificate of Eligibility (CoE).  The easiest way to do so is through contacting a mortgage lender and have them request the certification for you through the VA’s lender website.  Your mortgage lender will need some basic information from you and can then obtain your CoE instantly.  In some cases, the CoE is not available online and your lender will have to submit documentation to the VA in order to establish your eligibility.  Typically, a copy of your DD214 is required (or a statement of retirement points for a reservist).   You can also request them yourself through the VA’s website here: https://www.ebenefits.va.gov/ebenefits-portal/ebenefits.portal. 

What are some of the common qualifying rules for VA?

VA Home Loan guidelines are similar in many respects to standard mortgage rules.  Although the VA itself doesn’t have a minimum credit score requirement, most lenders establish their own minimum requirements. As I mentioned in my first blog, most VA loans don't require a down payment. However, you may need to document that you have enough cash to pay the closing costs associated with buying a home. Oftentimes, you can negotiate for your closing costs to be covered in part or in full by the seller, or receive a credit from your lender. VA loans don't require that you have reserves (assets left over after paying closing costs) unless you own another property.

VA loans do have some unique rules when it comes to debt and income.  All types of mortgages have limits to the amount of debt payments, including the proposed mortgage payment, that you can have when compared to your income (debt-to-income ratios or DTIs).  VA takes this a step further and requires what is called a “residual” income calculation, which factors in debts and income along with other factors, such as the size of the house you are buying and the number of children you have.   Unlike other types of mortgages, VA takes the cost of childcare into consideration.  The rules on these calculations are complicated and outside the scope of this post, but you should consult with your lender on these issues before beginning your home search.   In most cases, despite the additional qualification rules, using a VA loan will allow you to qualify for as much or more than other loan programs due to the lower payments and more flexible approval guidelines for debt-to-income ratios. 

 

Everyone’s situation is different, so check with your lender at the onset of the process for specifics on your personal situation. If you have any further questions, feel free to contact me and I’m happy to help! Feel free to check out our mortgage calculators, request a copy of our homebuyers guide or get started on your mortgage application.

About Brian:
Brian Willingham in a Senior Mortgage Banker with Apex Home Loans and served in the United States Marine Corps from 1993 to 1997.