Homeownership: Understanding VA Mortgage Eligibility
For those who have served our country with honor, the
VA mortgage program offers a unique advantage when purchasing a home. With its
competitive interest rates, no down payment requirement, and relaxed credit
score standards, it can seem like a dream come true. But before you start
packing boxes, there are some important conditions you need to meet to qualify
for this valuable benefit. The VA loan is perhaps one of the greatest benefits
for a veteran.
Military Service Requirements:
First and foremost, your eligibility hinges on your
military service. To qualify for a standard VA loan, you must have served at
least:
- 181
days of active duty during wartime
- 270
days of active duty during peacetime
- 6
years of service in the Reserves with an activated service period
(Title 32)
- 12
months of continuous active duty for service members currently on
active duty
Additional service requirements apply to National Guard
members and certain Reservists. You need a copy of your DD-214 form to provide
to your lender with your bank statements all pages, w-2 forms past two years,
any 1099’s past two years, thirty days of paystubs, and if any self employment
all returns for IRS past two years and a current profit and or loss year to
date.
Credit Score and Debt-to-Income Ratio:
While VA loans are known for their flexibility with
credit scores, having a good credit history can still be beneficial. Generally,
lenders prefer scores above 600, though lower scores might work depending on
other factors such as having reserve funds (checking or savings accounts with
money to be able to carry payments in the future. Additionally, your
debt-to-income ratio (DTI) will be evaluated. This measures your monthly debt
payments against your gross monthly income. Aim for a DTI below 41% for optimal
approval chances.
Entitlement and Down Payment:
Your "entitlement" refers to the amount of
the loan the VA guarantees to the lender in case of default. Generally, you
have full entitlement if you haven't used your benefit before or have paid off
a previous VA loan and sold the property. Having full entitlement allows you to
borrow up to the appraised value of the home without a down payment. However,
if you have less than full entitlement, you may need to make a down payment,
depending on the loan amount and lender's requirements.
VA loans are assumable BUT this is not advantageous for
the veteran as the veteran can lose some of their eligibility and not be able to
use the VA loan for other purchases. VA assumptions are full documentation with
two years IRS income using the net number so this is very difficult for someone
self employed to qualify. VA assumptions can take ninety days or more, depending
on the servicer.
Property Requirements:
The home you wish to purchase must also meet minimum
property requirements (MPRs) set by the VA to ensure it's safe and habitable.
These cover aspects like structural integrity, plumbing, electrical systems,
and roofing. The VA appraisal process inspects the property to ensure it
meets these standards. In general, the subject property cannot have health and
safety violations.
These are just general conditions, and individual
circumstances may differ. It's crucial to discuss your specific situation with
a VA loan specialist who can help you navigate the eligibility process and
determine your personalized options. Consulting multiple lenders can also help
you find the best rates and terms for your circumstances.
Owning a home is a dream for many, and the VA mortgage
program provides a valuable opportunity for veterans and service members to
turn that dream into reality. By understanding the eligibility conditions and
getting personalized guidance, you can accomplish your goals.
Let's talk about it
Caroline Gerardo
NMLS 324982
949 784 - 9699
