When individuals serve in the US military, they receive benefits from Veteran Affairs beyond their paycheck or pension. One of the excellent benefits is access to home loan products that the Department of Veteran Affairs guarantees, commonly known as VA loans.
VA loans make it easier for qualifying current and retired service members to purchase a primary residence by offering lower interest rates and full financing (zero down payment!). What’s more, is that they typically have lower loan requirements. Therefore borrowers can qualify with lower credit scores and higher debt-to-income ratios than conventional loan products. Plus, they don’t have to pay mortgage insurance, which adds up to huge monthly savings.
VA loan eligibility.
The eligibility requirement of a VA loan has to do with whether or not you or your spouse is an active or former military service member or is or was in the National Guard or Reserve. The complete list of requirements can be found on the VA website, but we have summarized them here:
- Active service members are eligible once they have completed 90 days of continuous service.
- Veterans who were discharged and served after August 2, 1990, with 24 months or more of continuous service. Those dishonorably discharged are not eligible.
- National Guard members will be eligible after 90 days of service. If they are in the reserves, they are eligible after six years.
One of the best benefits of the VA loan is that there is no minimum credit score requirement. However, it’s generally recommended that your score is at least 580. Remember, VA loan requirements are lower to make it easier for servicemembers and their families to buy homes.
In terms of debt-to-income requirements, while there is no maximum, it is challenging to get a loan approved with a higher DTI than 41%.
The most stringent requirement for VA loans is the income requirement.
Borrowers must prove that their income is stable and consistent and can be relied upon for the foreseeable future. In addition, they should expect to have the past two years of their employment history verified.
VA loans don’t require a down payment.
While VA loans don’t require a down payment, they can be helpful. If borrowers can contribute at least a 5% down payment, it will lower their VA funding fee and give the added benefit of a lower monthly payment.
VA loans are only for primary residences.
Borrowers can only hold one VA loan at a time, and the property must be their primary residence. The VA’s minimum property requirements can be found here.
The property will also need to be appraised to ensure it is worth the loan’s value.
Apply for a VA loan.
Before you can apply for a VA loan, you’ll need to obtain a Certificate of Eligibility here. If you think a VA loan product could work for your next home process, get in touch with one of our loan specialists so we can help assess your eligibility.