What Are the Qualifications for a VA Loan?

You may have heard that you need a perfect credit score to get a VA loan. That’s not true. Find out the minimum credit score and other qualifications you need for a VA loan.

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Introduction

The U.S. Department of Veterans Affairs (VA) insures loans made by approved lenders, such as banks, mortgage companies, and credit unions. The VA doesn’t make loans itself.

With a VA-backed loan, you can buy a home with no money down and generally don’t have to pay for private mortgage insurance (PMI). You can also qualify for a VA loan with less-than-perfect credit.

Basic Qualifications

You must have satisfactory credit, sufficient income, and a valid Certificate of Eligibility (COE) to be eligible for a VA-guaranteed home loan. The home must be for your own personal occupancy. To get a COE, you can apply online, work with a VA-recognized real estate professional, or work with a lending institution.

Eligibility

To be eligible for a VA loan, you must be a current or former member of the U.S. Armed Forces, a U.S. Veteran, or the surviving spouse of a Veteran who died in service or as a result of a service-related injury or condition. You also must meet certain service requirements, have a satisfactory credit history, and demonstrate a sufficient income to cover your monthly loan payments.

Loan Limits

The first step in getting a VA loan is determining whether you qualify. There are two main qualifying factors for VA loans:
-You must have served or be presently serving in the armed forces, including the National Guard or Reserves, or be the spouse of a service member who has died in the line of duty
-You must meet certain minimum requirements for length and character of service, generally 24 months continuous active duty or the full period for which you were called to active duty

Other Qualifications

In order to qualify for a VA loan, you must be a veteran, active duty service member, or National Guard or Reserves member. You must also have a good credit score, sufficient income, and a certificate of eligibility. There are also a few other qualifications that you may need to meet.

Credit Score

You’ll need a minimum credit score of 620 to qualify for a VA loan. However, some lenders may require a higher credit score. In addition, if you have a lower credit score, you may still be able to get a VA loan by making a larger down payment or by providing compensating factors.

Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is the percentage of your monthly income that goes toward paying your debts, including your mortgage. It’s important to keep this number low — ideally below 36%, but 41% is allowed — because a high DTI means you could have a hard time making your loan payments if there’s a financial setback.

To calculate your DTI, add up all of your monthly debt payments, including your housing costs, and divide that number by your gross monthly income (your income before taxes are taken out). If you don’t know what your DTI is, a lender can help you calculate it.

Employment History

A key qualification for a VA loan is your employment history. You’ll need to show that you have a steady income and employment history in order to qualify for a VA loan.

In general, you’ll need to have been employed for at least the past two years in order to qualify for a VA loan. However, there are some exceptions for veterans who have recently returned from active duty.

If you’re self-employed, you’ll need to provide additional documentation of your income and employment history in order to qualify for a VA loan.

Conclusion

The Veterans Affairs (VA) loan program is a great benefit for eligible veterans, active-duty service members, and reservists. VA loans offer competitive interest rates with little or no down payment and no private mortgage insurance (PMI). However, there are qualifications that potential borrowers must meet in order to be eligible for a VA loan.

In order to qualify for a VA loan, borrowers must:
-Be a veteran, active-duty service member, or reservist
-Have served at least 90 days of active duty during wartime or at least 181 days of active duty during peacetime
-Have a discharge status of “honorable”
-Have a satisfactory credit history
-Meet the income requirements set by the VA

Additionally, potential borrowers must also have a valid Certificate of Eligibility (COE) from the VA in order to qualify for a VA loan. The COE proves to lenders that the borrower is eligible for a VA loan and outlines the terms of the loan.

If you think you might be eligible for a VA loan, it’s important to speak with a qualified lending professional who can help you navigate the process and determine if a VA loan is right for you.