Who Qualifies for a VA Home Loan?

You may think only veterans can get a VA home loan, but there are actually a few other groups who qualify as well.

If you’re looking to buy a home and you’re not sure if you qualify for a VA home loan, read on to find out more.

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Introduction

The Veterans Administration provides a wide variety of benefits to veterans of the United States Armed Forces, and one of those benefits is the VA home loan. This program helps veterans finance the purchase of a home by offering them low interest rates and relaxed credit requirements. But not all veterans are eligible for this program. In order to qualify, you must meet certain service requirements and have a good credit history.

Here we will take a closer look at the VA home loan program and who qualifies for it.

Service Eligibility

Veterans and service members who have completed a minimum of 90 days of active service during wartime or during peacetime qualify for a VA home loan. Other eligible borrowers include reservists, National Guard members, and certain surviving spouses of veterans.

Active Duty

If you’re on active duty, you may be eligible for a VA home loan even if you haven’t yet completed your service. The requirements vary depending on when you entered service and whether you were called to active duty before or after September 7, 1980. If you qualify, you can apply for a VA home loan while still on active duty and before you’ve completed your service.

There are different requirements for those who were called to active duty before September 7, 1980, and those who were called to active duty after that date. To qualify for a loan, you must have served at least 90 days (unless discharged for service-connected disability) and must have either:

-Served at least 181 days of active duty if you entered service after September 7, 1980 (or been discharged for service-connected disability); or

-Served at least 90 days of active duty if you entered service before September 7, 1980.

National Guard and Reserve

You may be eligible for a VA-backed home loan as soon as you become a reservist or National Guard member. There’s no minimum service requirement. You’ll need a Certificate of Eligibility (COE) to apply for a VA-backed loan. To get your COE, visit a VA Regional Loan Center, talk to your lender, or go online.

Veterans

All full-time active duty service members qualify for a VA home loan. This includes members of the National Guard and Reserve who have been activated for at least 90 consecutive days. Other eligible borrowers include:
-Veterans who have been honorably discharged
-Spouses of service members who died in the line of duty or as a result of a service-related disability
-Certain surviving spouses of Veterans who died from a non-service related injury or illness after discharge from military service

In order to get a VA home loan, you’ll need a Certificate of Eligibility (COE) from the Veterans Administration proving that you are eligible for the program. You can apply for your COE online, through your lender, or by mail.

Surviving Spouses

Surviving spouses of veterans who died during service or as a result of service-connected disabilities are eligible for a VA home loan. In order to qualify, the surviving spouse must:
-Be unmarried
-Not have remarried since the Veteran’s death
-Have not had a servicemember die on active duty since the Veteran’s death
-In some cases, surviving spouses who remarried before December 16, 2003, may still qualify

Loan Types

There are four different types of VA home loans: VA direct loans, VA-backed loans, Native American direct loans, and Native American-backed loans. Each loan has different eligibility requirements, so it’s important to know which type of loan you need before you apply.

Purchase Loans

The first step in applying for a VA home loan is to obtain your Certificate of Eligibility (COE). You can do this one of three ways:
-Contact your local VA regional office, or
-Submit a completed VA Form 26-1880, Request for a Certificate of Eligibility, and supporting documentation to your local VA regional office, or
-If you are an existing VA borrower and have a current VA loan, you can apply for a subsequent VA loan through the Interest Rate Reduction Refinancing Loan (IRRRL) program.

Cash-Out Refinance Loans

A Cash-Out Refinance Loan lets you replace your current mortgage loan with a new one under different terms. If you have enough equity in your home, you can choose to take cash out of your home equity to pay off high-interest debt or make home improvements.

The Veterans Administration does not limit the amount of cash that you can take out of your home, but they do require that any excess cash over and above the amount needed to pay off your outstanding mortgage be used for “acceptable purposes.” These include paying off credit card debt, medical expenses, educational expenses, or other major expenses.

Interest Rate Reduction Refinance Loans

The Interest Rate Reduction Refinance Loan (IRRRL) helps veterans refinance their existing VA loans to a lower interest rate loan or to a fixed-rate loan (from an adjustable-rate loan). The goal of the IRRRL is to help veterans obtain a lower interest rate, which may reduce their monthly payments and save money over the life of the loan. Veterans can also use the IRRRL to convert an adjustable rate mortgage (ARM) to a fixed-rate mortgage.

Adapted Housing Grants

The Department of Veterans Affairs (VA) offers adapted housing grants to Veterans and service members with certain service-connected disabilities to help purchase or build an adapted home, or modify an existing home to accommodate a disability.

There are two types of adapted housing grants available through VA: the Specially Adapted Housing (SAH) grant and the Special Housing Adaptation (SHA) grant.

The SAH grant is for Veterans and service members with certain severe service-connected disabilities to help them purchase or build a specially adapted home. These homes are designed or modified to meet the unique needs of the Veteran or service member, such as accommodating a wheelchair, accommodating a hearing or visual impairment, or accommodating another type of disability.

The SHA grant is for Veterans and service members with certain service-connected disabilities to help them modify an existing home to accommodate their disability. These modifications may include installing ramps, widening doors, modifying bathrooms, or making other modifications to allow the Veteran or service member to live more independently.

Loan Limits

The loan limits are the amount of money that the VA will guarantee. The limit varies by county and is based on the median home price in that county. In most counties, the loan limit is $484,350. That means that if you buy a home for more than $484,350 using a VA loan,

Funding Fee

The funding fee is a percentage of the loan amount which varies based on the type of loan, whether this is the Veteran’s first time using the VA loan program, and if the buyer chooses to make a down payment. The funding fee for first-time VA loan users with no down payment is 2.15 percent of the total loan amount. For subsequent VA loans, it’s 3.3 percent. For veterans with a service-connected disability, the funding fee is waived entirely. If you’re putting down at least 5 percent, that figure drops to 1.25 percent for first-time buyers, and 3.3 percent for subsequent purchasers

Conclusion

There are a number of factors that go into whether or not you qualify for a VA home loan. Your length of service, discharge status, credit score, and residual income all play a role in determining if you meet the VA’s standards for home loan eligibility.

If you’re looking to apply for a VA home loan, it’s important to understand all of the requirements so that you can be sure you’re eligible. Once you know that you meet the basic qualifications, the next step is to get pre-qualified by a lender so that you can start shopping for your new home.