Everything America’s Military Veterans Need to Know about VA Home Loans
For many people, buying a home requires a pile of cash, putting homeownership out of reach. However, for those who qualify because of their military service (or spouse’s military service), it’s possible to get help buying a home with little or no money down through the VA loan program.
What is a VA loan?
A VA loan is guaranteed by the U.S. Department of Veterans Affairs. The loan itself isn’t actually made by the government, but the fact that it’s backed by a government agency makes lenders feel more comfortable in offering these loans, as they pose less risk.
As a result, it’s possible to get a VA loan without a down payment, and with sometimes-looser credit requirements. While you still need to meet certain requirements, and the lender still needs to approve you, if you qualify for a VA loan, it can help you attain homeownership.
How do VA loans work?
Basically, you fill out paperwork from the VA that verifies your eligibility for the program. You also receive what’s known as your entitlement, which is the dollar amount guaranteed on each VA loan. Lenders might be willing to loan up to four times the amount of your entitlement.
With all of that in place, it’s possible to get a VA loan with no money down. Additionally, instead of paying mortgage insurance, or PMI, you pay a VA funding fee at the beginning. It can start to get a little complicated, but with a little guidance, it’s possible to get through the process and buy a home. Let’s take a look at how to get a VA loan in a little more detail.
What are VA loan eligibility requirements?
First of all, you need to make sure you’re eligible for a VA loan. The government places service requirements on active duty, as well as offering an opportunity to get a VA loan for certain military spouses. You can get more information from the government’s website, but the basic requirements include:
- You’re currently active duty military, or you’re a veteran, honorably discharged.
- At least 90 consecutive days of active service during wartime or at least 181 consecutive days of active service during peacetime.
- More than six years of service in the National Guard or Selective Reserve.
Additionally, if your active duty spouse died in the line of duty, you might be able to qualify for a VA loan.
In order to go through the process, you need to obtain a VA Certificate of Eligibility, or COE. Without this certificate, you won’t be able to get your loan.
How to apply for a VA loan Certificate of Eligibility
If you’re looking for a VA loan Certificate of Eligibility, you can get one by applying through your eBenefits portal online or even applying through your lender.
In order to apply, you do need to provide different information, based on your current status. Veterans do need to provide a DD Form 214, and active duty servicemembers need a signed statement of service. A statement of service should include:
- Full name
- Date of birth
- Social Security number
- The date you started duty
- Any lost time
- Name of the command providing the information
Different requirements might need to be met for National Guard or Reserve members, as well as surviving spouses. You can find more information through the VA’s benefits website, as well as working with your lender for a list of paperwork and identifying information you need.
What are the VA loan home occupancy requirements?
In addition to making sure you’re eligible for a VA loan, you must meet occupancy requirements. You must live in the home you’re financing as a primary home — not using the money for an investment property or vacation home.
It’s also possible to refinance a VA loan, and the VA offers a program designed to help you refinance to a lower-rate VA loan.
What are VA loan underwriting requirements?
Each lender has its own criteria for deciding who’s a “good risk” for a mortgage. However, there are some basic things to keep in mind:
- Borrowers need to show they have the income to make the mortgage payments.
- They shouldn’t have a huge debt load.
- While there is no minimum credit score requirement, borrowers might have a hard time getting approved by a lender if they don’t have at least a 620 FICO Score.
It’s also possible to use home loan benefits after bankruptcy, as long as sufficient time has passed.
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