VA Home Loan Requirements Complete Guideline for Veterans
What are the requirements to apply for VA Home Loan in 2022?
Before answering this question let me clear what exactly is VA Home Loan.
The U.S. Department of Veterans Affairs (VA) established a mortgage loan program for veterans, service members, and their surviving spouses to purchase homes with little to no down payment and no private mortgage insurance and generally get a competitive interest rate which is issued through private lenders is called VA Loan or VA Home Loan.
So, VA loan is a great benefit for eligible service members, veterans and their surviving spouses to qualify for a low-cost mortgage when you’re looking to purchase or refinance or even if your credit is not perfect.
Let’s know about VA home loan requirements in 2022.
VA Home Loan Requirements
Not only veterans but also other classes of military members are eligible to apply for VA home loans. Here is the list who are eligible for VA loan:
- National Guard and Reserves Members
- Active-duty service members but not eligible active duty for training members
- Surviving spouses of veterans
- The National Oceanic & Atmospheric Administration officers
- The U.S. Military and Coast Guard or Air Force Academy cadets
- The U.S. Naval Academy midshipmen
- Retired Veterans with an honorable discharge
Not all Armed Forces members are eligible to qualify for a VA loan. You must fulfill the following criteria to qualify for a VA home loan:
For National Guard and Reserves Members:
The National Guard and Reserves Members who are serving and completed a minimum six-year duty period are eligible to apply for VA loans.
If discharged for a service-connected disability in that case may be eligible before completing the six-year’ time period.
For Active-Duty Service Members:
If you are now on regular duty as an active duty service member and have served 181 days during peacetime and for gulf war the time is 90 days then you are eligible for VA Loan, unless discharged from a previous qualifying period of active duty service.
For Spouses of Veterans:
If you are a surviving spouse and remarries on or after attaining age 57 or after December 16, 2003 then you may be eligible.
The spouses of service members who died while in service or from a service-connected disability are eligible for VA loan if not remarried.
The spouses of a service person missing from the line of duty or a prisoner of war are also may be eligible for a VA loan.
Retired Veteran’s Eligibility:
For retired veterans must have an honorable discharge from the duty and must have served 181 days during peacetime and for gulf war the time is 90 days as an active service member.
The Documents you’ll need for VA Loan
First of all you will need COE. What is COE? Certificate of Eligibility (COE) document verifies your VA loan eligibility. COE is your proof of service you need to submit based on whether you’re an active-duty military member, a veteran, a surviving spouse, etc. to show your mortgage lender that you’re eligible for a VA loan.
How to get COE? It’s very easy and simple. You can acquire a COE certificate yourself by applying on the VA eBenefits website or by mail. Otherwise your lender can help you to get one for you online in a matter of seconds.
Documents need to get COE
Veterans need to submit DD Form 214 which is a certificate that verifies your military discharge. You can get the form online by using the eVetRecs filing system.
If you are an active duty service member then you’ll need a statement of service signed by your superior officer. In this statement your full legal name, Social Security number and birth date must be included.
Before applying for COE Current National Guard or Reserve members also need a statement of service and the requirements of this statement are the same as for active service members.
Discharged members of the National Guard need to submit NGB Form 22 and 23 to get COE. For this form you should contact the National Guard Adjutant General’s Office of the state where you served.
If you are a discharged member of the Selected Reserve then you will need a copy of your annual Retirement Points Statement to get COE. You will also need a proof document of honorable service and discharge.
Surviving spouses who do not get dependency benefits need to complete VA form 21P-534-ARE from the VA benefits website. Before that they need to submit their spouse's DD Form 214, marriage license and spouse’s death certificate. Surviving spouses who receive dependency benefits need to complete VA form 26-1817 to get COE.
Other Requirements for VA Loan Eligibility
Credit Score: There is no specific credit requirement for VA Loan. That’s why credit requirements vary by lender. There is a minimum number of credit score set by lenders that is 620.
Down Payment: Generally, VA home loans don’t require a down payment. But lenders may have specific requirements for a no-down-payment VA loan.
Residual Income Calculation: It needs to determine how much free cash you have in each month after paying your monthly obligations from your after-tax income. VA lenders do it by using residual income calculator and residual income requirements depend on the family size, the size of home and location of the property.
DTI: Determining debt-to-income ratio (DTI) is another requirement to get a VA home loan. Lender evaluates it to consider your ability to pay back the loan. DTI ratio is calculated by dividing total monthly debt by your gross monthly income which is no more than 41%.
Minimum Property Requirements (MPRs): There are some Minimum Property Requirements needed to meet for the homes which are financed with VA loans. These guidelines confirm the property is safe from all perspectives. The appraiser who is approved by the VA lender will note if any mandatory repairs are needed. It must be ensured that the property you buy is your primary residence within 60 days of purchase. For vacation or investment purposes you can’t use your property.
Closing Cost: To avoid extra charge from VA lenders the VA imposes 1% closing cost cap on VA loans. That means the origination fees, credit report, flood certification and tax monitoring charges which are imposed by the lender can’t equal more than 1% of your loan amount. Discount points and the VA funding fee are separated from this calculation.
Funding Fee: Who gets a VA loan must pay a one-time VA funding fee to cover the cost to taxpayers. The VA funding fee is calculated on your loan amount which ranges from 2.3 – 3.6%. There is an advantage- if borrowers don’t have the money up front, the VA funding fee can be rolled into the loan amount. The determination of funding fee cost depends on the type of your service, the size of the down payment, whether it’s the first-time you’re getting a VA loan or you are buying or refinancing the property.
Reserve Funds: Having additional money in the bank is required to get most of the loans to ensure that you’re not using for upfront costs. This confirms that you’ll be able to make payments when your loan closes. The reserve fund is determined by the cost of your mortgage payment, including principal, interest, taxes and insurance. It’s not always required but it’s a good to show reserves equal to two months’ worth of mortgage payments.
VA loan limits in 2022
The VA doesn’t limit the loan amount but there is a cap on the VA’s guarantee. The guaranteed amount of money they'll cover if you default on your loan in case. In most of the country the loan limit for a no-down-payment VA loan is $548,250.
But high-cost areas have higher limits. If you need a loan higher than that amount you can look into a VA jumbo loan. It doesn’t require a down payment and can offer a lower rate than regular jumbo loans.
Benefits of VA Loan
VA loans are exceptional than any other conventional loans because VA loans have some extra benefits. Such as-
- Lower interest rates.
- No down payment requirement.
- No mortgage insurance.
- Easier credit requirements and
- Additional advantages for disabled veterans.
How To Apply For A VA Loan
Already talked about the requirements and other terms of VA Loan. Now it's time to apply for a VA Loan. Very excited, right?
Follow the below application processes to apply for a VA Loan.
- Obtain a Certificate of Eligibility (COE).
- Find a VA-approved lender which can be a bank, credit union or private mortgage company.
- Filling out a VA Loan application.
- Submit the required documents to the lender.
- Shop around for a real estate agent and begin your home search.
- Make an offer of purchase agreement on a home.
- Negotiate the sales price with the sellers if need any home repairing cost.
- Close on your VA Loan by getting the keys to your new home and officially be a homeowner.
At last, A VA loan is a great option for our military to be a homeowner with lower interest rate and no down payment. Which is not possible in other conventional loans. So if you are in military service you should try for VA home loan.