Guide: VA Home Loan Requirements & Mortgage Requirements for Buyers

Since the VA mortgage requirements can feel complicated, we’ve assembled this guide to break it down. For military borrowers, VA loans are one of the most powerful lending programs to acquire a home loan, in part because they are somewhat simpler to acquire.

VA loans are generally flexible, with little or no down payment, and they have helped over 21 million military homeowners since the 1940s.

VA Home Loan Requirements

VA Loan Requirements

However, for those who haven’t done their research, even long-time VA borrowers will find themselves unfamiliar with current updates within the program.

For specifics, take notes within this article to see what types of paperwork will be needed and for a better understanding of the time and patience involved with homebuying.

Let’s start with the benefits for using a VA loan before we move on to determine the VA home loan requirements.

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Understanding VA Home Loan Benefits for Military Families

More often than not, a lot of red tape comes with acquiring a home loan. Luckily for veterans, VA mortgage requirements are minimal and their benefits are vast. Knowing how VA loans work and your eligibility is often the first step.

  • No Down Payment Required. For the majority of people, finding a loan that requires no money down is nearly impossible. FHA loans are usually the closest with a 3.5 percent option, but sometimes that isn’t an option. Knowing VA home loan requirements is your first step to acquiring this amazing option.
  • No Private Mortgage Insurance (PMI). If you meet the VA home loan credit requirements, you will learn that the VA loan program allows for military borrowers to avoid PMI costs, which can range from 0.5 to 1 percent of the home’s value, which can mean thousands of dollars.
  • Open-Minded Credit Requirements. While most other lenders have raised their standards on credit scores, the VA loan home requirements are less strict. For buyers with credit scores 620 or above, VA loan requirements for buyers can earn financing, which is perfect for military buyers.
  • Modest Interest Rates. For those who fit the requirements for a VA home loan, there are modest interest rates that fluctuate depending on the borrower. Since these rates are lower, military borrowers can save big on their investments.
  • No Prepay Penalties. While most buyers are not concerned with prepay penalties, those who wish to be debt-free will find such penalties to be a problem. VA mortgage loan requirements allow for the freedom to pay off debts on your own terms.

In order to receive these benefits and more, it’s best to start working on your VA loan requirements and VA loans property requirements. In order to see if you qualify for these amazing benefits, follow along to learn more about VA mortgage requirements.

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Military Service Requirements for a VA Home Loan

Not everyone who is eligible for a VA loan will acquire one, but you must be eligible in order to receive such a loan. More specifically, active military and veterans need to meet certain VA mortgage loan requirements to participate, but not every participant gets approved because the loans come from private funds, unlike the mortgage business.

So what are military service requirements for a VA home loan? One of the following must be true:

  • Serve at least 90 consecutive days active during wartime
  • Serve at least 181 consecutive days during peacetime
  • Serve at least 6 years for the National Guard or Reserves
  • Be the surviving military spouse for those who died in the line of duty or with a service-related, major disability

The above criteria represent the major benchmarks for VA loan property requirements, but there are still some issues that can occur. For example, if there were a medical issue, service members could be eligible with only a week of service. On the other hand, those who qualify outright but have a dishonorable discharge may be denied or come up for review.

Loan Preapproval with VA Home Loan Requirements

Anything within homebuying and mortgages can be confusing for everyone. Within the paperwork, there are various acronyms and technical verbiage, which can make things complicated. Even the term “preapproval” doesn’t always relate to “-approval” when it comes to VA mortgage requirements.

Once the VA home loan credit requirements have been met, a preapproval letter will often be acquired. The essential tool for a new home search, the preapproval letter lets any outside parties know that you have met requirements and acquired information by a cerified VA lender.

Specifically, the letter that displays eligibility for VA home loan requirements explains that any negative changes within the credit history or even the debt-to-income ratio could mean a void approval. As each condition within the letter is important, other factors include property appraisal and approval from the lender’s underwriting staff.

In addition, another of the VA loan home requirements includes additional appraisal from the loan office after a purchase agreement has been made.

Essentially, the underwriter will examine the loan, any additional tax statements or W-2s, along with credit or bank statements to determine that the application and VA home loan requirements meets the standards of all parties involved.

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Earnest Money and How to Keep It

As mentioned before, pre-approval is not always approval. With that in mind, those seeking to earn all VA loan requirements for buyers must understand that preapproval comes with certain conditions; for example, a loan could fall though, which means loss of property or loss of earnest money if it had been required.

In order to protect yourself from such when seeking to earn VA home loan credit requirements, make sure to include a condition that covers your earnest money within the document. Since earnest money is a sign of good faith, it can be taken if something falls through for another, outside reason.

Credit Questions from VA Lenders

While the credit standards are freer than other loans, those seeking to acquire a loan and meet the requirements for a VA home loan need to know which questions may be coming their way. The following list provides those questions for you so you are prepared on the big day.

  • What is your credit score? If your credit score is above 620, more than likely, you will meet the credit score standards as far as VA loan home requirements go. For those below 620, however, there could be an issue. Since there are three different credit scores on the market, it’s best to ask the lender which of the prequalification standards they use for preapproval.
  • Are there any previous collection or judgment filings on your record? This question refers to overdue accounts, which can include anything from credit card companies to past landlords. Multiple judgments are not ideal for VA loan requirements.
  • Are there any foreclosures or bankruptcies on your record? Similar to previous judgments, this is the larger issue of past money problems. For those with Chapter 7 bankruptcy, Chapter 13 bankruptcy, or foreclosures on their record, a minimum of 12-36 months since the filed date is the general requirement for a VA home loan.
  • Is your current income stable and sufficient? While the previous questions cover the past, the final question covers the future. Lenders want to make sure their money is secure, so it’s important you have a steady income in order to meet VA loan requirements for buyers.

In order to meet the requirements for a VA home loan, it’s important to be able to answer the above questions honestly and within their standards. Overall, make sure you have a proper credit score with minimal debt and avoid bankruptcy whenever possible. Finally, make sure your income is stable.

How Much Can Be Borrowed When VA Home Loan Requirements Are Met?

After answering the lender’s questions, the borrower will often have questions of their own. Perhaps the first question will be, “How much can I borrow on a VA loan?” This amount will depend on a number of factors. These will include the average costs of homes in the area, debt-to-income ratios, property value, and residual income, among others.

Typically, according to the Veterans United Home Loans website, most VA lenders cap their loans around $417,000 due to the VA guaranty. This guaranty backs up the loan to a certain amount by the federal government when it comes to VA home loan requirements.

Lenders are welcome to issue loans above that amount, but they will not be granted any additional backing, creating risk. This is important for those who wish to understand VA mortgage loan requirements and their specific, finite limitations.

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Your Guide to Home Ownership

The first step is, of course, to prequalify. For those seeking VA home loan credit requirements, it’s possible to first fill out a contact form online or at a local office to begin the prequalification process. For those looking to seek a specialist, there are various options on the market. When finding such, make sure to find someone you trust by reading reviews and asking around.

Next, getting pre-approved is crucial for VA loan property requirements, which come later. At first, the paperwork will feel overbearing, but businesses like Veterans United can provide experts to help with preapproval letters, additional questions, and even finding real estate agents in your area.

Documents to bring along with you include pay stubs, tax returns, W-2s, employment history, real estate assets (if any), in addition to banking and investment statements. With this array of information, approval can be easy since most of the VA loan requirements have already been met.

Once preapproval has been met, the next step will be to find a realtor. Let your realtor know that you have met the requirements for a VA home loan so they know which properties to show you. Your letter may provide specific details about the type of home or area in which you can purchase.

Home loan requirements

Requirements for a VA Home Loan

Finally, once all requirements for a VA home loan have been met and your realtor has helped you find the ideal home, it’s time to make an offer.

This may involve negotiating with the seller and additional paperwork, so ask your realtor any specific questions you have. No question is too small; remember, this is your future home, so be patient and take the time to think through the scenarios.

After making an offer, the last bit of work will involve processing and closing. No doubt, the lender will check over VA loan home requirements to make sure all procedures have been met accordingly.

In addition, your loan documentation will then move on to an underwriter who will check all documents and financial records to make sure everything is in place. Finally, you will sign the important paperwork.

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Potential Closing Costs for VA Loan Requirements

Since every mortgage comes with their own closing costs and other additional expenses, homebuyers can often find themselves confused when seeing the final numbers. Closing costs are not always represented in the beginning, since the phrase itself can actually be a catchall term.

VA loan requirements for buyers do not include these final numbers. While some of these expenses represent the costs of doing a loan, others may involve specific expenses for the home in question. Some need to be paid immediately, while others can wait until the final numbers have been processed.

VA home loan requirements in regards to a closing cost include the following potential fees. Appraisal fees can hit VA buyers and generally cost around $400 or more. Next, title charges may arise, specifically if there are any liens or legal defects within the deal.

Discount points, which can be paid to lower interest rates, often occur during the discussion of VA home loan requirements. Essentially, with discount points, you are paying upfront to avoid costs down the road.

Final costs may include credit reports, which costs about $50, and there could also be termite or inspection costs involved. In addition, there are always other possibilities as each home and deal are different.

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Final Thoughts on VA Mortgage Requirements

VA loan property requirements and VA mortgage loan requirements can be complicated. It seems straightforward enough to serve in the military, find a good job afterward, and apply, but it can be a little more complicated than those simple terms.

These complications arise due to credit, time served, and more.

VA home loan requirements involve service or the spouse of one, in addition to any medical or disability issues that arose from the time served. In addition, VA home loan requirements also involve credit, current employment, and any past dues or foreclosures on your credit report.

Even with all of this information, it’s possible to find yourself preapproved, but still not get approved in the end.

Since preapproval only refers to a portion of the VA home loan requirements, it might be best to speak with a professional, such as a realtor, especially when seeking additional information in regard to VA loan property requirements.

Once the proper procedures have been filed and occur, the next steps involve questions of how much to borrow, which will be different with every situation but may involve a cap due to regulations.

For those who have the proper VA home loan requirements in place, the steps should be simple.

After the paperwork has been filed, the next step will be the home search. Be prepared, as this step can take some time.

There will be endless options at first, but once you begin to filter and share your VA home loan requirements with a realtor, those options will narrow down to the perfect home for you.

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