Mortgages

VA Loan Requirements for 2020

VA loans typically don't require a down payment, but you still need decent credit and sufficient income to get approved.

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VA loans help thousands of military service members and veterans buy homes each year. Here's a look at who can apply and the requirements to qualify for a VA loan.

VA loan eligibility

Backed by the U.S. Department of Veterans Affairs, VA loans are a benefit for active-duty and veteran military service members and some surviving spouses. You're eligible to apply for a VA loan if:

  • You are on active duty and have served 90 continuous days.

  • You are a veteran who meets length-of-service requirements, which generally are 90 days in wartime and 181 days in peacetime.

  • You completed 90 days of active-duty service or six creditable years in the Selected Reserve or National Guard.

  • You are the surviving spouse of a veteran who died while in service or from a service-connected disability and you have not remarried. Or you remarried after age 57 or Dec. 16, 2003. Spouses of service members missing in action or prisoners of war are also eligible.

You may still qualify even if you don't meet the length-of-service requirements in some cases, such as being discharged for a service-connected disability. Check with the VA for details.

You may not be eligible if you received an "other than honorable," bad conduct or dishonorable discharge, although you can apply with the VA to upgrade your discharge status.

How to apply for a VA loan

You can apply for a VA loan through a bank, mortgage company or credit union that offers them. The process is similar to applying for other types of mortgages — you supply employment, income and other financial information, and the lender decides whether you qualify.

One unique item you'll need is a VA certificate of eligibility. The certificate of eligibility is a document from the Department of Veterans Affairs that shows you meet the service requirements for a VA loan. You can request the document through the VA, or ask a VA mortgage lender to get the certificate of eligibility for you.

VA loan qualifications: credit, debt and income

Lenders will review your credit, debt and income to decide whether you qualify and to determine the interest rates they will offer.

Credit requirements

The VA doesn’t set a minimum credit score to qualify for a loan. But VA mortgage lenders can set their own minimum standards for FICO credit scores, which are typically in the low- to mid-600s.

The average FICO score of VA purchase borrowers in 2019 ranged from 706 to 713, depending on the month, according to mortgage data provider Ellie Mae. The average FICO score of VA refinance borrowers in 2019 ranged from 690 to 714.

Lenders will also look at your credit report, particularly your history of making timely payments.

DTI for VA loan

The VA prefers a debt-to-income ratio, or DTI, of no more than 41%. But borrowers with higher DTI ratios can get approved if they have enough "residual income," another factor lenders consider when reviewing mortgage applications. Residual income is the money left to cover basic living expenses, such as food and clothing, after paying debts, housing and other obligations.

VA loan down payment requirements

Under most circumstances, VA loans don’t require a minimum down payment. However, if the purchase price of the home is greater than its appraised value, you may have to make up at least a portion of the difference.

And if you are subject to VA loan limits and the home price exceeds the county loan limit, then a down payment will be required.

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.

An advantage of putting some money down is it will likely reduce the VA funding fee.

VA loan property requirements

The home you want to buy must meet the VA's minimum property requirements. The standards ensure that homes financed by VA loans are safe, structurally sound and sanitary.

After you're under contract to buy a home, the lender will hire a VA-approved appraiser to estimate the home's market value and make sure it meets the minimum property requirements. A VA appraisal may also be required when refinancing a VA loan.

Eligibility for other VA loans and grants

The VA also offers housing grants for veterans and service members with service-connected disabilities and home loans for Native Americans.

Disability housing grants

This program offers three grants to help veterans and service members with service-connected disabilities buy or modify a home to meet their needs. The Specially Adapted Housing grant is for a home you own or will buy. The Special Housing Adaptation grant can be for a home you or a family member own or will buy. The Temporary Residence Adaptation grant is for a family member's home where you're temporarily living. You must have a qualifying service-connected disability to be eligible for any of the grants.

You can apply online through the benefits portal on the VA website or download VA Form 26-4555 and send it to your nearest regional loan center.

Native American Direct Loan

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

To get started, confirm that your native community participates in the NADL program, apply for a VA certificate of eligibility and contact the VA regional loan center for your state.