1/15/2024

VA Mortgages




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