Article

VA Loan Requirements for 2019

VA loans usually don’t require a down payment, and they have lenient credit requirements, but you still need decent credit and sufficient income to get approved.

Hal M. Bundrick, CFPOctober 28, 2019

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VA loan requirements: Summary

You may qualify if:

  • You’re an active-duty military member or veteran who meets length-of-service requirements.

  • You’re the spouse of a prisoner of war or service member who’s missing in action; the unremarried spouse of a military member who died while on active duty or from a service-connected disability; or a surviving spouse who remarries on or after age 57.

  • The property you want to buy meets safety standards and building codes.

  • You meet the lender’s requirements for credit and income.

Qualifying for a VA loan

The opportunity to get a VA loan is a benefit for military service members, veterans and certain spouses. To apply, you’ll need to get a VA loan certificate of eligibility and meet a lender’s VA loan requirements.

Here’s a look at VA loan guidelines and how to qualify for a VA loan:

General VA loan requirements

While a VA mortgage's qualifying requirements are more relaxed than those for a conventional loan, an applicant still needs to have decent credit and sufficient income to buy a home. And the home being financed must serve as the primary residence.

Credit score requirements

The VA doesn’t set a minimum credit score to qualify for a loan. Instead, it requires a lender “to review the entire loan profile to make a lending decision,” according to the VA. However, each lender you shop will have its own FICO score requirement.

VA loan debt-to-income ratio

The VA also doesn't specify a maximum debt-to-income ratio. But if the total debt-to-income ratio is over 41%, lenders will need to provide proof of an applicant’s ability to repay the loan, says Greg Nelms, the VA's chief of loan policy. They do this by assessing your “residual income,” accounting for all your monthly living expenses, as well as what your mortgage payment would be.

Lender requirements

Lenders can add “overlays” — or additional requirements — to VA qualifications. They can range from the number of credit accounts that you have to the number of reported late payments within a specified time frame. Some lenders may require a higher credit score or allow a lower one. That’s why it’s important to apply to more than one lender.

Down payment requirements

Under most circumstances, you don't need to make a down payment. But if you decide to put some money down, it will likely reduce the VA funding fee. However, if the purchase price of the home is greater than its appraised value — or above the county loan limit (see below) — you may have to make up at least a portion of the difference.

If you’re buying in a competitive market where buyers outnumber home sellers, you may need a down payment just to get your foot in the door. A bidding situation will require a deposit for the seller, and as a portion of your down payment, it shows you are a serious buyer.

VA loan limits

The maximum VA loan guaranty limits the value of a home that can be purchased with no down payment. In 2019, a qualified borrower generally can buy a home with a value of up to $484,350 with no down payment, though the actual amount varies by county.

These guidelines mirror the single-family conforming loan limits established by the Federal Housing Finance Agency. Areas with higher-value properties have higher limits — and there are even higher value ceilings for Alaska, Hawaii, Guam and the U.S. Virgin Islands.

Property requirements

As with other government-insured home loans, the VA has stringent property requirements. Most involve a property’s safety, living conditions and compliance with building codes. Newly built homes must have certain warranties or protection plans or have been built by a veteran for his or her own occupancy, though there are additional exceptions.

Modular and manufactured homes must also meet specific requirements.

Required fees

While a VA-insured home loan carries no mortgage insurance requirement, you will be charged a funding fee. This helps the VA cover the costs of mortgage foreclosures. The amount of the fee ranges from 1.25% to 3.3% of the loan amount, depending on the down payment, how long you served and for which branch of the military, and whether you’ve tapped your VA home loan benefit previously.

Many times this fee is added to the total loan amount, rather than being paid upfront. That will increase your monthly payment and the amount of interest you’ll pay during the loan term.

Veterans who receive VA disability compensation and qualified surviving spouses don’t have to pay the funding fee.

VA loan eligibility: How to apply for a VA loan

You apply for a VA loan through a bank, mortgage company or credit union that offers VA loans. Interest rates and fees vary by lender, so it’s important to shop around and compare at least three before selecting one. You don’t have to have a copy of your VA certificate of eligibility before you shop for a lender. Many VA lenders can get the VA certificate of eligibility for you.

You're entitled to apply for a VA mortgage if you're active duty or have separated from military service under an “other than dishonorable discharge,” the VA says.

Additionally:

  • Veterans must meet length-of-service requirements.

  • Service members on active duty must serve for a minimum period.

  • Reservists and National Guard members may be eligible.

Spouses in certain circumstances can also apply. They include:

  • Unremarried spouses of veterans who died while in service or from a service-related disability.

  • Spouses of service members who are missing in action or prisoners of war.

  • Surviving spouses who remarry on or after reaching age 57, and on or after Dec. 16, 2003.

  • Surviving spouses of certain veterans who were totally disabled.

How many times can you use a VA loan benefit?

Getting a VA loan isn’t a one-time deal. After using a VA mortgage to purchase a home, you can get another VA loan if:

  • You sell the house and pay off the VA loan completely.

  • You sell the house, and a qualified veteran buyer agrees to assume the VA loan.

  • You repay the VA loan in full and keep the house. For one time only, you can get another VA loan to purchase an additional home as your primary residence.

Eligibility for other VA housing programs

The U.S. armed forces are a diverse population, and the VA has a couple of programs to meet the housing needs of certain service members and veterans.

Special Housing Adaptation Grant This program targets severely disabled veterans and service members. For qualified applicants with mobility issues, blindness, respiratory or other service-connected disabilities, Special Housing Adaptation grants help finance the purchase, construction or renovation of homes to meet their needs.

The program helps provide housing that can accommodate wheelchairs, as well as other accessibility improvements.

You can apply for a grant by submitting VA Form 26-4555 online or to a regional loan center.

Native American Direct Loan Helping Native Americans buy, build, improve or refinance homes on federally recognized trust land is the goal of the Native American Veteran Direct Loan Program. The program is available to Native American tribes, as well as Alaska Native corporations and residents of Pacific Island territories.

You'll want to confirm that your native community participates in the NADL program, then ask a lender about potential benefits after you obtain your certificate of eligibility.

VA loan alternatives

Borrowers used their VA home loan benefit to fund more than 600,000 loans in 2018. No doubt, little or no down payment, lenient credit qualifications and low mortgage rates were some of the reasons.

Other options requiring low down payments are available to qualified buyers:

  • FHA loans require down payments as low as 3.5% with low interest rates that come with government-insured loans. However, FHA loans require paying upfront and ongoing mortgage insurance premiums.

  • Conventional mortgages with low down payment requirements are available for borrowers with good credit. However, lenders generally require private mortgage insurance for down payments under 20%.