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VA loan requirements

If you have served in the military, or are the surviving spouse of a military member, you might qualify for a VA loan

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by Michele Lerner Mortgage & Real Estate Contributing Editor
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Who qualifies for a VA loan?

Military and National Guard members, reservists and veterans can qualify for VA loans. Surviving spouses of military members who have passed away due to a service-related injury or incident can also qualify. Unfortunately, children of military service members cannot qualify for a VA loan unless they join the military themselves. Certain other special cases might qualify for a VA loan, like a U.S. citizen who served in an Allied force during World War II or officers of the National Oceanic & Atmospheric Administration. VA loan eligibility also depends on days of active service.

VA loan guidelines:

  • 90 consecutive days of active service during wartime
  • 181 days of active service during peacetime
  • 6 years of service in the National Guard or Reserves
  • The un-remarried spouse of a service member who has passed away

What are the requirements for a VA loan?

VA home loan requirements are relatively straightforward. As long as you are eligible for a VA loan as an active or retired member of the military or a surviving spouse of a military member, you can apply for a VA loan. Once you qualify, you are provided a Certificate of Eligibility, which you can use to apply for your next VA loan or to refinance your existing loan.

  • VA loan income requirements
    There isn’t a minimum income requirement to qualify for a VA loan, but you need enough residual income to have your loan approved. This means you need to have enough money left for other expenses at the end of each month after paying all your debts and necessary payments including your mortgage payment, property taxes and insurance, federal and state taxes.

    Residual income requirements vary depending on how many people live in the home and what region the home is located in. Homeowners living in low-cost parts of the country, like the Midwest and South, will have lower residual income limits than homeowners living in the Northwest. For example, one person living in a house in the South might only need $400 of residual income, while a family of five living in California would need over $1,000.

  • VA loan credit score requirements
    The VA doesn’t impose a minimum credit score for VA loans, though most lenders impose their own floor credit score minimums, usually around 620. Because the loan is backed by the government, lenders may be more inclined to offer a loan to you even if you have bad credit or have foreclosed on a home.
  • VA loan debt to income ratio requirements
    The VA uses a debt-to-income ratio of 41 percent, which is higher than you can find for conventional loans. This means that your total debt, including your mortgage, can only account for up to 41 percent of your total income. Some lenders might even go higher than 41 percent depending on your circumstances.
  • VA loan down payment requirements
    The biggest benefit of getting a VA loan is the ability to finance up to 100 percent of the home price. This means you don’t have to come up with a down payment. VA loans are also assumable, which means someone who buys your home can assume the loan at the same interest rate you’re paying. This can be a good selling point if you need to move your property fast. However, keep in mind that the person who buys your home needs to meet VA home loan requirements in order to assume your VA loan.

Additional VA loan questions

What is a VA funding fee?
Every VA loan, including refinancing loans, includes a funding fee, which goes to the Department of Veterans Affairs. This is to protect taxpayer dollars and offset any losses that result when someone defaults on a VA loan.

Save money on your funding fee by making a larger down payment.

This set fee is lower for first-time home buyers and regular military members than for reservists, National Guard members and repeat home buyers, and it’s waived for veterans with service-related disabilities. The funding fee rate decreases as you put more money down. The funding fee ranges from 1.25 percent to 2.4 percent of the total loan amount and decreases as you put more money down.

Your funding fee can be combined with your loan, which would add money to your monthly payment, or it can be paid in cash separately. In exchange for paying this fee, VA loan borrowers are not required to pay for mortgage insurance.

What is the maximum VA loan amount?
For qualified borrowers, there is no maximum VA loan amount that you can apply for. However, there is a limit on how much money the VA will guarantee. This can vary from state to state, but the standard VA loan limit in 2018 was $453,100, an increase of $29,000 from 2017. The maximum amount guaranteed in 2018 was $679,650 in certain areas of the country.

How many times can you get a VA loan?
You can get as many VA loans as you want for your entire life once you have served. This is referred to as an “entitlement,” and servicemembers technically have two of these entitlements. You can use both of them at once, but you must pay off one of the loans before you can use one of your entitlements again. Once the debt is paid, you can reuse your entitlement as many times as you need.

How much are VA closing costs?
Just as with any loan, when it comes time to finalize the transaction there will be closing costs. Depending on the sale, VA loan closing costs can vary from 1-5 percent of the cost of the home. In many cases, sellers will offer to cover the closing costs as a benefit to the buyer.

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Are VA loans worth it?

If you are a qualifying member of the military or veteran and you have less than 20 percent to put down on a home, then a VA loan from a reliable VA loan lender might be worth it. If you can put down 20 percent or more, you might be better off with a conventional loan, since you won’t need to pay the funding fee.

A VA loan is also a good option for qualifying military members who have endured financial hardship. You can get a VA loan much faster after bankruptcy or foreclosure than you can get a conventional loan—just one year after filing chapter 13 bankruptcy, two years after a chapter 7 bankruptcy is discharged, and two years after a foreclosure.

Either way, because of your service or the service of your spouse, you have the option of a government-backed, no-money-down way to pay for your new home.

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Profile picture of Michele Lerner
by Michele Lerner Mortgage & Real Estate Contributing Editor

Michele Lerner, author of “HOMEBUYING: Tough Times, First Time, Any Time”, has been writing about personal finance and real estate for more than two decades. Michele writes for regional, national and international publications in print and online for a variety of audiences including consumers, real estate investors, business owners and real estate professionals.