Who Qualifies for a VA Loan?

You may think you need to be a veteran to get a VA loan, but there are actually a few other ways to qualify.

Read on to see if you might be eligible for a VA loan.

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General Qualifications

All service members on active duty, members of the National Guard and reservists may qualify. Veterans who have been separated under honorable conditions from any branch of the Armed Forces are also eligible, as are the unmarried surviving spouses of veterans who died in service or as a result of a service-related disability.

You must have satisfactory credit

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.

VA-guaranteed loans are provided by private lenders, such as banks, savings & loans, or mortgage companies. VA insures a portion of the loan, enabling the lender to provide you with more favorable financing terms.

You must have a steady income

In order to qualify for a VA Loan, you must have a steady income. If you are retired, you will need to show that you have a pension or other source of income that is sufficient to cover your loan payments. If you are employed, you will need to provide your most recent pay stubs and W-2 forms as well as evidence of any other income sources such as investments or child support.

You must have a valid Certificate of Eligibility (COE)

The first step in getting a VA direct or VA-backed home loan is to apply for a Certificate of Eligibility (COE). This confirms for your lender that you qualify for the program and tells you how much house you can afford. These benefits are available to certain veterans and reservists. You can also apply for a COE to refinance an existing home loan with a VA direct or VA-backed loan.

If you don’t know if you’re eligible, you can check by using our VA Eligibility tool or calling us at 1-888-832-2363. If you need help getting your COE, we’re here to help. Complete our Veteran eligibility form, and once we determine that you are eligible and have applied for your COE, we will contact you to discuss next steps.

Qualifying for a VA Loan with Bad Credit

The VA loan is a great way for veterans and active military to purchase a home with no money down and often at a lower interest rate than conventional loans. But what if you have bad credit? Do you still qualify for a VA loan? The answer may surprise you.

You must have a minimum credit score of 580

In order to get a VA loan with bad credit, you’ll need to have a minimum credit score of 580. This is significantly lower than the minimum credit score required for a conventional loan, which is typically around 620. Even if you have a 580 credit score, you may still need to put down a sizeable down payment in order to qualify for a VA loan.

You must prove your credit history is stable

If you have a low credit score, you’re not alone. In fact, 29% of Americans have credit scores below 650, according to Experian. And many lenders require a minimum score of 660 to 680 in order to qualify for a conventional mortgage.

But just because you have bad credit doesn’t mean you can’t get a mortgage through the VA. In fact, the VA doesn’t even look at your credit score when determining eligibility for the program. However, that doesn’t mean there aren’t any hurdles you’ll need to clear in order to get a VA loan with bad credit.

First and foremost, you’ll need to prove your credit history is stable. That generally means having at least two years of consistent employment and no major derogatory marks on your credit report during that time frame. You’ll also likely need a down payment of at least 10%, as well as enough income to cover your monthly mortgage payment, debts, and other financial obligations.

Of course, the specific requirements will vary from lender to lender, so it’s important to shop around and compare your options before choosing a VA loan provider.

You must have a down payment of at least 10 percent

In addition to the above two requirements, you must also have a down payment of at least 10 percent of the appraised value or sales price of the home, whichever is less. The down payment can come from your own savings, a gift from a relative, or from a grant or other form of assistance from a government agency or nonprofit organization. If you are using your own savings, you will need to provide documentation to your lender indicating that the funds are available and will not be used for any other purpose.

Qualifying for a VA Loan with Limited Income

You may have heard that government-backed VA loans are only for low-income borrowers who can’t afford a conventional mortgage. That’s not entirely true. While it’s true that VA loan income limits exist, they’re actually pretty generous. In most counties, a single person can earn up to $54,000 a year and still qualify for a VA loan.

You must have a debt-to-income (DTI) ratio of 41 percent or less

Many people mistakenly believe that they don’t earn enough money to qualify for a VA loan. But that’s not necessarily true. You may still be able to get a VA loan even if your income is low.

One of the key factors lenders will look at when determining if you qualify for a VA loan is your debt-to-income (DTI) ratio. This is the amount of debt you have compared to your income. To qualify for a VA loan, you must have a DTI ratio of 41 percent or less.

If your DTI ratio is too high, there are a couple things you can do to try to lower it. One option is to try and negotiate with your creditors to lower your interest rates. Another option is to try and increase your income by getting a better-paying job or working more hours at your current job.

If you still can’t get your DTI ratio low enough, you may still be able to get a VA loan by getting what’s called a debt management plan. With this option, you work with a credit counseling agency to come up with a plan to pay off your debts over time. Once you make all of your payments on time for 12 months, the credit counseling agency will then send a letter to the lender stating that you’ve successfully completed the debt management plan. The lender may then decide to give you the VA loan even though your DTI ratio is higher than 41 percent.

If you think you might qualify for a VA loan but are worried about your DTI ratio, contact a VA-approved lender. They can help you figure out what steps you need to take in order to get the loan approval process started

You may be able to qualify with a DTI of up to 50 percent with compensating factors

Debt-to-income ratio is one factor that lenders use to assess whether you qualify for a loan. DTI is the percentage of your monthly gross income that would go toward housing expenses and all of your other monthly debt obligations, including credit cards, car loans, child support and alimony.

For example, if your housing expenses are $1,500 per month and your monthly debt obligations are $500, your DTI would be $2,000 divided by $5,000, or 40 percent. Most conventional lenders prefer that your DTI not exceed 43 percent.

VA loan guidelines allow veterans and service members to qualify with a maximum DTI of 50 percent in some cases. If you have strong compensating factors — such as a high credit score or a substantial amount of money saved for a down payment — you may be able to qualify for a VA loan with a 50 percent DTI.

Qualifying for a VA Loan with Limited Savings

If you are a military veteran or are still active duty, you may be eligible for a VA loan. VA loans are available to qualified individuals with limited savings for a down payment. Down payments can be as low as zero for a VA loan. In addition, closing costs can also be financed into the loan.

You must have a minimum of $3,000

In order to qualify for a VA loan with limited savings, you must have a minimum of $3,000 to put towards a down payment. Additionally, you must have enough left over in your savings to cover the costs of any necessary repairs or renovations that need to be made to the property prior to move-in. If you do not have at least $3,000 available for a down payment, you may still qualify for a VA loan if you are able to provide proof of income and sufficient assets.

You can use a family member’s savings

If you don’t have the savings required for a conventional mortgage or a down payment saved up, you may still qualify for a VA loan. In fact, the VA allows qualified homebuyers to use money gifted to them by an immediate family member to make their down payment.

There are some restrictions on how much can be gifted, as well as who can gift the money. According to the VA, the down payment can’t exceed 4% of the home’s purchase price, and must come from an “irrevocable trust account” set up specifically for this purpose. Additionally, only close relatives can gift the money—generally defined as spouses, children, parents, grandparents, siblings, aunts and uncles.

Of course, even if you do qualify for a VA loan with limited savings, it’s still wise to try and contribute something to your down payment if you can afford it. The larger your down payment is, the lower your monthly mortgage payments will be—and that can make owning a home more affordable in the long-run.

Other Qualifications

In order to qualify for a VA loan, you must be a veteran, active-duty service member, reservist, or National Guard member. You must also have served for a minimum of 90 consecutive days during wartime or 180 days during peacetime. You must also have a good credit score and sufficient income to make your loan payments.

You must be a U.S. citizen or eligible non-citizen

In order to qualify for a VA Loan, you must be a U.S. citizen or an eligible non-citizen. An eligible non-citizen is defined as:

-a lawful permanent resident of the U.S.
-a conditional permanent resident of the U.S., such as through marriage to a U.S. citizen
-a non-permanent resident with certain immigration statuses, such as being a refugee, asylee, or having Temporary Protected Status (TPS)

All other non-citizens are not eligible for VA Loans, even if they are legal residents with work authorization (via an employment-based visa, for example).

You must have a valid Social Security number

You must have a valid Social Security number at the time of your loan application. You can get a Social Security number by visiting the Social Security Administration website or by calling them at 1-800-772-1213.

You must be of legal borrowing age in your state

You must be of legal borrowing age in your state. If you are a veteran, you have to be 18. If you are not a veteran, you have to be 21.