Below are the basic VA loan requirements needed to obtain a VA loan. Although it would seem very straight forward and simple, VA loans require quite a bit of detail and knowledge on the VA Loan Representative’s part to assure the VA loan process goes smoothly for you. In fact, there is so much more that goes into originating VA loans, that most banks require VA training before offering VA loans to customers. This assures the bank’s reputation is upheld and it’s customers are well taken care of. In most cases, brokers do not require or offer VA training to its employees.
Most veterans or service members of the US military are eligible for a VA loan if they completed any one of the following requirements:
- 181 Days of Peacetime Active Duty Service
- 91 Days of Wartime Active Duty Service
- 6 Years of Reserves or National Guard Service
If any of those are true or you are the spouse of a servicemember who was killed in action, more than likely, you are eligible for a VA Loan. You will need to get a copy of your Certificate of Eligibility from the VA Eligibility Center or an easier way would be to contact a VA Loan Specialist to help you obtain your certicate of eligibility and let you know exactly how much you qualify for.
VA Loan Certificate of Eligibility
Before you can get a VA Home Loan, you must first obtain your VA Loan Certificate of Eligibility (COE). To obtain your Certificate of Eligibility, you must complete the VA Form 26-1880 Certificate of Eligibility request. You may be able to obtain your COE by submitting your completed VA Form 26-1880 and your Form DD-214 Discharge Papers to your lender. If your lender is approved to use the VA’s Automated Certificate of Eligibility system (ACE), you may be able to get your COE in less than 24-48 hours. If your lender is not approved to use the ACE system, it could take longer.
The VA does not set a minimum credit score requirement to insure VA Loans. However most lending institutions require at least a 620 FICO score in order to approve a VA Loan Application. The VA Loan underwriter will generally be looking for at least one year of good credit history. A past Bankruptcy may be OK, but all mortgage payments must have been made on time for at 12 months prior to closing on the loan. If the Bankruptcy was a Chapter 7, the veteran must wait at least two years from the discharge date to apply for a VA Loan.
To be approved for a VA loan, there are two methods used to qualify a veteran’s income. The primary method of evaluating a veteran’s income is “residual income”. This method determines if a veteran has sufficient income to cover daily living expenses after paying housing expenses, taxes, and other debts such as car payments and credit card payments. The second uses the debt-to-income ratio method, like other mortgage products. VA Loans only use one ratio which is the ratio of total debt to income including your new house payment. Using this method, the veteran’s total debts should not exceed 45% of the veterans total income. However, this is generally if VA doesn’t automatically agree to insure the loan. VA may agree to insure the loan with ratios in excess of 55% and higher with compensating factors such as excellent credit, proof of significant amount of assets in reserves and exceedingly high residual income levels. It will be up to the lender to agree to finance the VA loan with the elevated debt ratios.
All other VA requirements don’t matter if the occupancy requirements can’t be met. Often times for veterans, it’s not an issue as the veteran will occupy the home immediately or very soon after purchasing the home. However, service members on deployment or with PCS orders can’t move into the home right away. Often times they won’t be able to actually occupy the home for months. Can you buy the home using your VA eligibility?
Here are the basic VA occupancy requirements:
You must certify that you intend to occupy the property as your primary residence. No other type of residency will be accepted. The standard time frame to occupy the home is set at no more than 60 days.
The 60 day occupancy requirement can be satisfied if your spouse will be living in the home while you are deployed, on PCS orders, or otherwise unable to personally occupy the home. A spouse may also satisfy the occupancy requirement if the veteran cannot due to long distance employment issues. However, this decision will be at the lender’s discretion and not an automatic app
In 2012, The Honoring America’s Veterans and Caring for Camp Lejeune Families Act was passed allowing a dependent child to occupy the home while their parent or parents are deployed or on active duty away from the home. Keep in mind that because VA allows the dependent to occupy the home does not automatically satisfy the requirement. You must take additional action by having your attorney or dependent’s legal guardian make the occupancy certification. In addition, many lenders will not recognize the dependent occupancy rule.