7 Requirements For A VA Loan
When looking for a new home, you want to understand all the options out there for you. If you ever were a part of the military or were a military property owner member’s spouse, you should look into applying for a VA loan.
VA loans are a great benefit and can possibly save you money in the long run. Here is everything you need to know and all the requirements to see if you are eligible for a VA loan.
Minimum Service Requirements
Eligibility for a VA loan is earned and not given. You or your spouse will have to have served in the military to gain the benefits and access to a VA loan. Here are all the minimum service requirements to get a VA loan:
| When Did You Serve? | Minimum Requirements |
| During WWII (Sept. 1940 to July 1947) | 90 days active duty or discharged with a service-connected disability. |
| Post-WWII period (July 1947 to June 1950) | 181 continuous days or discharged with a service-connected disability |
| Korean War (June 1950 to Jan. 1955) | 90 days total or discharged with a service-connected disability. |
| Post-Korean War (Jan. 1955 to Aug. 1964) | 181 continuous days or discharged with a service-connected disability. |
| Vietnam War (Aug. 1964 to May 1975) | 90 days total or discharged with a service-connected disability. |
| Post-Vietnam War (May 1975 to Sep. 1980) | 181 continuous days or discharged with a service-connected disability. |
| Between Sept. 1980 and Aug. 1990 | 24 continuous months or the full period, at least 181 days, that you were called for active duty |
| Gulf War (Aug. 1990 to present) | 24 continuous months or the full period, at least 90 days, that you were called for active duty or at least 90 days if you were discharged or less than 90 days if you were discharged with a service-connected disability. |
| Separated from the service after Sep. 1980 | 24 continuous months or the full period, at least 181 days, that you were called for active duty or at least 181 days if you were discharged or less than 181 days if you were discharged with a service-connected disability. |
| Currently Active Duty | 90 continuous days |
If you or your spouse is in the National Guard or the Reserves, there are different requirements to qualify for VA loans. This minimum requirement is below:
| When Did You Serve? | Minimum Requirements |
| Gulf War (Aug. 1990 to present) | 90 days of active duty |
| Any period | 6 creditable years of the Reserves or National Guard and one of the following:
|
If you or your spouse were ever discharged dishonorably, you do not qualify for a VA loan. If you think there has been a mistake, there are many resources you can choose from to help get qualified. This is not a guarantee though. Here are those resources:
- VA Regional Loan Office
- VA Loan Online Help
Other People Who Qualify
You don’t have to be a member of the military to qualify for a VA loan. If you are a spouse of an active military member or someone who served and meets the minimum service requirements, you too can get the loan.
If you are still unsure if you qualify or not, you can always apply for a VA loan or speak to a specialist. There is always support via the internet to help you find the resources you need and inform you on things you are unsure about.
If your spouse died in action or during their enlistment period, you may qualify for a VA loan. Make sure you have all your paperwork in order and if you don’t see the necessary requirements, contact your local VA office for more information.
Documents Requirements
When it comes to military benefits, you will always need many documents about your services. This also includes all the normal documents you would need for a normal mortgage loan. Because you need some military background, you will have information on the lengths of services.
Here is the list of the many documents you will need to qualify for the VA loan based on your type of service:
| Service Type | Document Type |
| Veteran | DD Form 214 (Report of Separation) |
| Current or Former Activated National Guard or Reserves | DD Form 214 (Report of Separation) |
| Active Duty Military Member | Statement of Service |
| Never Activated National Guard or Reserves | Statement of Service |
| Discharged National Guard | NGB Form 22 (Report of Separation and Record of Service) and NGB Form 23 (Retirement Points Accounting and proof of the character of service) |
| Discharged Reserves | Army Reserve: DARP Form FM 249-2E or ARPC Form 606-E. Navy Reserve: NRPC 1070-124. Air Force Reserve: AF 526. Marine Corps Reserve: NAVMC HQ509 or NAVMC 798. Coast Guard Reserve: CG 4174 or 4175 |
Other documents that you need that are the same as traditional mortgage loans are the following:
- Income verification like pay stubs or tax returns
- List of assets and their worth.
- List of debts
There may be other documents that the VA lender may require. They will inform you what they need during the application process.
The Type Of Property For A Loan
VA loans are very strict to the type of property it will cover but it is not as limiting as you may think. Here are some of the types of properties that a VA loan will cover:
- Condominium
- Manufactured homes
- Modular homes
- New Construction
- Single-family homes
With any of these purchases though, this home must be your primary residence. You cannot use your VA loan for a lake house you visit twice a year or a second home for vacations. It must be your primary home where you stay year-round.
Condominium
Condos are rising in popularity and are available for a VA loan. When you do find a condo that you want to live in, you will need to understand that the entire condominium complex will have to be approved.
Oftentimes, there is a list of “approved” condos that the lender will approve but if you don’t find your location on there, contact the VA to get it directly approved. Remember that this will take time and is a complicated process.
Manufactured Homes
Manufactured homes are built at one location and then transported to a new one. They depreciate over time so you are less likely to be approved for this type of home, but it is still an option. Just be ready for rejection.
The VA will most likely approve it if the manufactured home has the following:
- Single-wide homes need to be at least 400 square feet.
- Double-wide homes need to at least be 700 square feet.
- Must be attached to the correct foundation (varies depending on location).
- Must have all the proper utilities: cooking, cleaning, bathing, and sleeping areas.
Modular Homes
These homes are often built at another location in sections and then moved to the property. These types of homes don’t depreciate like manufactured homes often do and so you will find more lenders for this home than a manufactured home.
New Construction
If you are wanting to create your own home, this is the route to go. You can construct your own home. But choosing this route does come with a catch. You will find that there is a lot of red tapes you have to go through for new construction and not many people go this route.
If you truly want your own, unique home, this is a great choice. It may be a little tedious in the beginning but you can get the dream home you have always wanted.
Single Family Homes
Single-family homes are the traditional property types that VA loans often cover. You can easily get approved for these. Just remember that the condition of the home will be the determinate for if the VA approves the home or not. Anything too much of a “fixer upper” will be declined.
Unavailable Properties For A VA Loan
You will find that many property types don’t qualify for a VA Loan. When you are looking for properties to buy with your VA loan, steer away from co-op properties or vacant land. You will immediately be rejected.
The Appraisal And Inspection
The VA will require that the property will be appraised and inspected before they invest in it. This is to make sure that the house is worth the price on the market and that there are no unseen problems that will need to be fixed.
The Appraisal Process
The appraiser is there to help make sure you are getting your money’s worth. Their goal is to ensure that the market price is fair and that it is safe for you to live in. Though it can sometimes be confused–an appraisal is not an inspection.
When an appraiser comes to the house, they will look at the house. They are not certified to see every problem like an inspection might, but they will ask some difficult questions. This process can take about ten days but may vary depending on the location of the home and the VA appraiser’s timeline. Always prepare for the possibility of delays.
VA Appraisal Checklist
The appraisal will have a list of questions to ask during the inspection. Here are some of those questions to expect so you can do a quick look first to see if the property will pass this process:
- Is it a residential property?
- Is the space large enough for food, sleep, and living?
- Does it have clean drinking water?
- Does the property have central heat and air?
- Does the property have a working sewage system?
- Is each system in working order?
- Is the roof in good condition, and will it last for a while?
- Are there any areas that need foundational fixing?
If any of these answers are no, the property you are looking at may not get approval for the loan. Qualifications for a VA loan can be very specific.
What Will Fail The Appraisal’s Inspection
You may be wondering what exactly will cause the appraisal inspection to fail. Well, here is a list of things that will cause an appraiser to say no to the VA loan:
- No working HVAC system.
- Roof damage or issues.
- Any signs of rotting wood.
- Termite or bug infestations.
- Water stains (signs of leaks).
- Utilities aren’t working or are shut off.
- Exposed wiring.
- Electrical issues.
- Peeling, bubbling, or chipping paint.
- Broken windows.
- Missing handrails.
These issues can cause you to bargain for a lower price. You will need to discuss this with the appraiser and the owner of the property to see if they are willing to negotiate. If the negotiation doesn’t meet your standards, you may want to move to another property.
At this point, if you are still unsure, you can always hire an inspector to take a look at the home. There is no shame in hiring one. You never can be too sure about the history of a home and an inspector can make sure you are getting your money’s worth.
The Inspection Checklist
Now the inspectors will check more in-depth at house that the appraiser may have missed. Inspectors are often certified or experienced professionals, while appraisers don’t have to be certified in this area.
Here are a few areas that the inspector will look at to see if there are any issues or problems:
- Basement or crawl spaces
- Floors
- Structure
- Walls
- Windows and doors
- HVAC system
- Electrical system
- Ceilings
- Attic
- Roof
The inspector may reveal problems that the appraiser may have missed. If you are unsure about a property, paying for an inspector can help you with your final decision. Regardless of the type of home, it is always recommended to have a professional inspection done on a home you are considering purchasing.
Required Debt To Income Ratio
Many lenders look at the debt to income ratio before handing out a loan. This is the same case for VA loans. If your debt is too high, you would be a risky investment and there is an increased chance that you won’t be able to repay the loan.
Lenders consider this to see the likelihood of you paying back the loan. If you already have too much debt compared to your income, you wouldn’t be a good investment. If you don’t have much debt, then you are a safer person to invest in.
If you are looking for the number to what ratio to look for to be approved, here is that number. You will need to have the percentage of debt to income ratio be anywhere below 41%. Anything higher than that will either be declined or need collateral just in case you can’t make a payment.
The great thing about getting approval for a VA loan, they will take several types of paychecks as income to counteract the debt. These incomes include:
- Basic housing allowance.
- Disability pay
- Retirement income
- Other military allowances
Traditional loans that don’t have VA backing sometimes will not accept these as income. This can make it harder for you to find a loan that benefits you without having high-interest rates.
Minimum Credit Score
A great credit score is in the 700s but with a VA loan, there isn’t a minimum credit score limit. Even with this lack of requirement, you will realize that the minimum credit score varies with each lender. The average mean of many of those getting a loan is about 580 credit score.
You could still be rejected by a lender if your credit score is too low and other factors are involved. You can always try to bring your credit score up before applying or you can just see if a lender will go ahead and approve you. You may just have higher interest rates than others.
Ways To Increase Your Credit Score
If you are worried that your credit score is too low or you have been declined for this reason, here are some methods to increase your credit score without breaking the bank:
- Reduce or pay off your credit card debt.
- Increase your credit limit.
- Check your credit report for any mistakes.
- Ask to remove any negative entries you paid off to be removed from your credit report.
- Pay your bills on time.
- Don’t close your credit cards.
- Mix up your borrowed money with a credit card, small loans, and more.
- Use a secured credit card.
Even if you have a high limit on your credit cards, don’t max them out. When you have a higher line of credit but a low amount borrowed in comparison, it shows you are reliable and reduces your debt to income ratio.
If your credit is so low, you can borrow small secured loans. This is often best for those that have little to no credit. You save up money and then borrow a small loan against the money you already have in your account. The lender freezes that amount of money in your account and makes that money available as you continue to pay.
When you open a small secured loan like this, make sure to not pay it off too quickly. If you immediately pay it off, it will not show lenders that you can pay off the debt over some time. They want to see that you are reliable to pay over some time because this will be a large sum.
Things The VA Loan Does Not Cover
Although VA loans cover a lot of things and provide amazing benefits, there are a few things that it doesn’t cover. Here are some things that a VA loan cannot guarantee or provide to its lender:
- Cannot make a construction worker correct any defects on a new home.
- Guarantee there are defects in the home that was missed upon appraisal.
- That the home will be resold for the price you bought it at.
- It doesn’t cover vacant lands or co-op properties.
- Vacation or investment properties.
- Farmland that doesn’t have a residency.
- A home in a foreign country.
- A second home that isn’t your primary residency.
Just remember that this is a loan and that the VA cannot promise anything about the condition of the property you are spending the loan on. This is where you bring in your judgment and intuition to the matter. Be completely sure the property is for you before purchasing it.
Will You Have to Pay A Down Payment?
When it comes to a VA Loan, you don’t have to gather your funds and give a down payment. This is great for those who don’t have enough money saved up for a home. Down payments can be several thousand dollars, money not everyone has.
There have been a few exceptions when using a VA loan to pay for your home where the applicant had to pay for the down payment. This happens rarely and you will most likely not have to put down the money up front.
How Do You Apply For The VA Loan
The application process takes about 30 to 45 days. If you are currently looking at a few homes, you will want to apply sooner than later so that you can get the process going. Here are the steps you need to take to apply for the loan:
- Look at the eligibility requirements.
- Look for a lender here.
- Start your application.
- Get your “Certificate of Eligibility” from a lender.
- Finalize your application with the proper documents.
Once you are approved, you can start the process to get your home approved. Remember this will take some time and it is a lengthy process. Be patient and remember that the benefits outweigh the downfalls.
VA Loan Benefits
Getting a VA loan instead of a traditional one will always be the better choice. There is a long list of reasons and benefits. Here they are:
- There is no maximum on a VA loan.
- It is reusable as long as the previous one is paid off.
- No down payment.
- Lowest interest rate.
- No prepayment penalties.
- Helps with foreclosure avoidance.
- Requires an appraisal to see if you’re getting your money’s worth.
- Limited closing costs.
- No need for Private Mortgage Insurance.
- It is a lifetime benefit.
- You can use it to refinance when approved.
- Funding fee exemptions
If you are eligible for a VA loan, you should strongly think about using this loan rather than the traditional route. You will find that you could save yourself thousands of dollars in comparison and they will help you if you worry about missing a payment.
You will find that when you get a conventional loan there are not as many benefits. Here is what to expect with a traditional loan compared to a VA loan:
- At least a 3% down payment if not more.
- An origination fee.
- Mortgage insurance is required for any down payment less than 20%.
- Minimum credit score of 620.
- Higher interest rates.
- Interest rates can change over time.
- No extra resources to help with payments.
- Won’t take military allowances as income.
VA Loan Options
You may find yourself unable to get a VA loan or just want other options. Don’t fret. There are many other options you can choose from that may be better than just getting a normal mortgage loan. Here are a few available options that you may want to look into:
- Purchase loan
- Native American Direct Loan
- Interest rate reduction refinance loan
- Cash-out refinance loan
Purchase Loan
You can get a purchase loan that has competitive interest rates for you. They are VA-backed and you will find this option is often the most common choice. Many lenders often charge only a flat fee of one percent, so you won’t find extra fees in this area.
Native American Direct Loan
If you or your spouse is a veteran and either one of you is Native American, you can qualify for this loan. This offers you decreased interest rates and saves you money. The interest rate will stay the same and you won’t expect any hidden fees.
You could even qualify for refinancing with this loan which will benefit you greatly. When you refinance, you will get the lowest interest rate option and it will save you money in the long run. You won’t see the interest rate going up like with other loans.
Interest Rate Reduction Refinance Loan
If you are searching to reduce your interest rate or your monthly payment, this is the type of loan for you. You will refinance your home for lower payments by replacing your old loan with a newer one.
Cash-out Refinance Loan
You can use this option when you want to refinance your home under different terms. You will take cash out of your home equity to pay off other debt or to make home improvements. This is also wonderful if you are in a tough spot and need some quick money for an obstacle.
Outro
You will find that VA loans are a great option if you meet the VA loan requirements. This type of lender will not only save you money but give you opportunities on properties you may not have thought you had. Check to see if you qualify so you, too, can reap the benefits of this loan.
