What Are the Minimum Requirements for a VA Home Loan?
The first requirement for a VA home loan is that you are eligible for VA loan benefits. Most veterans, soldiers, National Guardsmen, and reservists are qualified.
Other requirements include adequate credit (usually 620 or more), stable income, and permanent employment.
Fortunately for veterans and service members, the VA home loan does not require a down payment. So you don’t have to save a lot of money to qualify.
Check Eligibility for VA Loans (June 28, 2021)
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Requirements for VA Loans
Since VA mortgages are military loans, you can qualify if you are a veterinarian or an active duty member. But serving in the Army (or a service member’s surviving spouse) is not an automatic permit.
To get a VA loan, you must meet one of the following requirements for military service:
- Served 90 consecutive days of active duty during the war
- Served 181 days of active service in peacetime
- Served in the National Guard or the Reserves for more than six years (or 90 days under Title 32, with at least 30 of those days in a row)
- You are the surviving spouse of a service member who died in the service or of a service disability
If you meet the qualifications, you can obtain a Certificate of Eligibility (COE) prior to applying, proving your eligibility for VA funding.
Your COE will also provide information about your VA eligibility.
If you have not yet used your VA home loan benefit, you are “fully eligible” and should be able to take out loans without a down payment.
You can request your Certificate of Eligibility through the Department of Veterans Affairs eBenefits portal.
Or your lender can access the database and get one on your behalf, usually in just a few minutes.
Connect with a VA Lender and Receive Your COE (June 28, 2021)
No deposit required
The VA loan program is unique in that it does not require a down payment and borrowers do not pay mortgage insurance.
Private Mortgage Insurance (PMI) is usually required when buying a home with less than a 20% discount. But VA borrowers avoid this additional monthly fee.
However, this doesn’t mean that VA loans aren’t free.
VA closing costs
Even if you zero out, you are still responsible for upfront closing costs. This includes lender fees and third party mortgage-related expenses such as:
- Lending fee
- Title fees
- Appraisal fees
- Discount points
- Credit Report Fee
- Prepayment of property taxes and home insurance
- Admission fees
- Real estate commissions
VA closing costs vary but often range from 3-5% of the loan amount for smaller loans and 2-3% for larger loans.
For example, the closing cost for a $ 350,000 VA mortgage can range from $ 7,000 to $ 10,500 (2-3%).
The VA funding fee
You will also need to pay a one-time VA funding fee that will help fund the VA program.
The amount of the financing fee depends on your type of loan (home purchase or refinancing), your down payment and whether you have already taken out a VA loan.
For first-time home buyers with no down payment, the financing fee is 2.3% of the loan amount ($ 2,300 for every $ 100,000 borrowed).
Note that you can add the financing fee to your loan balance so you don’t have to pay it out of pocket upfront.
VA Loan Credit Requirements
The VA does not set any minimum requirements for creditworthiness. This is different from a traditional loan or FHA loan, which requires FICO scores of 620 and 580, respectively.
Note, however, that lenders have their own minimum loan requirements.
Most VA lenders want to see a credit score of at least 620. Some will go up to 580.
The lender will also check your credit report to make sure you have a clean credit history.
For example, some lenders only allow a 30-day late payment within the last 12 months.
What if you’ve had a bankruptcy or foreclosure in the past? You must wait two years after a Chapter 7 discharge to qualify for a VA loan, or 12 months from the Chapter 13 bankruptcy filing date. The waiting period after a foreclosure is two years.
Income needed for a VA loan
The VA home loan program has no minimum or maximum income limits. However, your mortgage lender will check your personal income to see what the monthly payment you can afford.
They will also check your employment record to make sure you have a steady job and source of income.
You will need to provide supporting documents when applying for a VA loan such as: B .:
- Tax returns and W-2s from the past two years
- Latest pay slips
- Current account statements for current accounts, savings accounts, retirement accounts and other investments
- Driving license
If you use other income for eligible purposes, such as B. Spousal support or child support, also provide a copy of your divorce decree and other supporting evidence.
To use support payments for qualifying purposes, you must have received those payments for at least 12 months and they must continue to run for at least 36 months after the mortgage loan was closed.
Remember that lenders often require 24 months of consecutive employment, preferably with the same employer or in the same industry.
If you are self-employed, you must submit a two-year trade tax return and an income statement for the current year.
Debt-To-Income Ratio For A VA Loan
The Debt-Income Ratio (DTI) is the percentage of your gross monthly income that is used for monthly debt payments.
Lenders will review your income and calculate your DTI to determine your maximum loan amount.
A maximum DTI of 41% is usually allowed on a VA loan.
This means that your existing debt (credit card payments, car loans, student loans, etc.) plus your new mortgage payment should not be more than 41% of your monthly pre-tax income.
Remember, this is not a hard and fast rule. It is possible to qualify with a higher DTI – but only if you have a higher residual income.
This is revenue that is left over after you pay for important expenses like your mortgage payment, installment loans, estimated operating expenses, support payments, and revolving accounts. Lenders use income records and information on your credit report to measure your residual income.
If you have a lot of cash to spare, you may be able to qualify for a larger loan amount.
Check Your Maximum VA Loan Amount (June 28, 2021)
VA credit limits
According to the US Department of Veterans Affairs, there is no limit or cap on how much you can borrow on a VA loan.
As long as you are eligible – that is, you’ve never used a VA loan before – you can borrow as much as the lender allows with no down payment.
Remember that the amount you can afford is still limited by your income, DTI, and balance.
Your lender will only approve a large loan amount if they know you can afford the monthly mortgage payments.
The credit rating has a big impact on your mortgage rate. Top-scoring borrowers usually qualify for the lowest interest rates, which increases purchasing power.
VA loans with no full entitlement
If you’re not fully eligible – maybe because you have an existing VA loan or one you paid off but still own the house – there are caps on the amount you can borrow without a down payment.
This limit varies and depends on the appropriate credit limit for your region.
In 2021 it will be between $ 548,250 and $ 822,375. In more expensive housing markets, the credit limits are higher. If you need a higher loan amount without a down payment, a VA jumbo loan is a good option.
VA Loan Property Requirements
Also, remember that you can only buy a primary residence with a VA loan. This is a home that you want to live in full time.
You cannot use a VA loan to buy a vacation home or rental property. The only exception is if you are buying an apartment building and living in one of the units.
However, you can use a VA loan to buy a home and rent it out at a later date.
Your new home must also meet the minimum VA ownership requirements, meaning it is safe and hygienic.
The lender will commission a VA appraisal and your appraiser will inspect the property and determine its market value. As a rule of thumb, you can’t borrow more than the value of a property.
Mortgage Rates on VA Loans
VA mortgage rates are typically lower than the rates on other types of loans.
That’s because the VA Guarantee makes these loans less risky for lenders. And it allows them to demand lower interest rates from borrowers.
VA borrowers have several options for their interest rate. You can choose:
- Fixed-rate mortgage – Your interest rate will remain the same for the life of the loan, as will your mortgage payments
- Variable rate mortgage – Your tariff is set for a certain number of years and is reset every year thereafter. Your monthly payments will change when your plan is reset
Fixed rates are predictable and usually the better option if you are planning on living in a home for the long term.
Critical factors that affect mortgage rates are your creditworthiness and your debt-to-income ratio.
The higher your creditworthiness and the less debt you have, the lower your risk of default. Because of this, if you pay your bills on time and keep your debt low, you can qualify for low mortgage rates.
However, rates vary from lender to lender. So make sure you get quotes from three or four VA approved lenders to compare rates, terms, and fees.
If you can find the best deal, you could save thousands – even tens of thousands – over the life of your VA home loan.
Confirm your new price (June 28, 2021)
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