If you are a member or former military member, one way you can finance your dream home is through a VA loan. The Department of Veterans Affairs insures these loans so 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 on 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 qualify for a VA loan. There are some other exceptions, so if you’re unsure 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’ll 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 need an acceptable debt-to-income ratio (“DTI”). This DTI divides your monthly debts by your gross monthly income.
Another income-related requirement relates to residual income. This is the monthly income after all other expenses have been paid. This remaining amount should cover food, transportation, and other basic living costs. The residual income the VA requires to qualify for their program will vary by location and family size.
Remember that although the VA doesn’t set minimum credit score limits, lenders may have specific credit score requirements.
Your House Must be 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 accurately estimate the home’s actual 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 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 your VA loan payments 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 the next steps. Or you might still have questions about financing options. NASB can help you on both fronts, so call us at 888-661-1982 or click here for a free rate quote.
