VA Eligibility Guidelines And Requirements On VA Home Loans

The U.S. government created and implement VA loans to reward active-duty and retired members of the U.S. Military to show their appreciation of serving our country.

• Only U.S. Armed Services veterans who meet the VA Eligibility Guidelines And Requirements can qualify to obtain a Certificate of Eligibility (COE)
• You need a valid COE to meet the VA Eligibility Guidelines And Requirements to qualify for VA mortgages
• VA loans are the best loan program for owner-occupant borrowers
• There are no down payment requirements on VA home loans
• The VA will guarantee lenders who originate and fund VA loans in the event the borrowers defaults and/or forecloses on their VA loan
• This only holds true as long as they meet the VA Eligibility Guidelines And Requirements
• There is no minimum credit score requirements nor debt to income ratio caps on VA mortgages as long as the borrower can get an approve/eligible per AUS
• There are no maximum loan limit caps on VA loans
• VA Eligibility Guidelines And Requirements are the most lenient than any other loan program

In this article, we will cover and discuss VA Eligibility Guidelines And Requirements On VA Home Loans.

Learn more about VA Eligibility Guidelines And Requirements.

VA Eligibility Guidelines And Requirements Versus Lender Overlays

The U.S. Department of Veterans Affairs sets the VA Eligibility Guidelines And Requirements.

• All lenders need to meet the minimum agency VA Eligibility Guidelines And Requirements
• However, each lender may impose higher credit and income guidelines on VA loans called lender overlays
• Most lenders have overlays
• Gustan Cho Associates has no lender overlays on VA loans

We just go off the minimum VA Eligibility Guidelines And Requirements imposed by the VA and have no other overlays.

Common Lender Overlays Imposed By Mortgage Companies On VA Loans

Mortgage companies can impose lender overlays on just about anything. Lenders can have overlays and tougher underwriting requirements on the following:

Credit scores:

• The VA does not have a minimum credit score requirement as long as the borrower has an approve/eligible per AUS
• However, most lenders have overlays on VA loans where they may require a 620 to 640 credit score
• Having high credit scores on VA loans is important because it determines mortgage rates

Debt to income ratios:

• The VA does not have a maximum debt to income ratio cap on VA mortgages
• Most lenders may cap debt to income ratios on VA loans at 45% to 50% DTI even though the VA does not require it
• The automated underwriting system normally will render an approve/eligible per AUS on borrowers with strong residual income

Outstanding collections:

• Outstanding collections do not have to be paid to qualify for VA loans

Outstanding charged-off accounts:

• Outstanding charged-off accounts do not have to be paid
• Taking 5% of outstanding collection account balance does not apply on charged-off accounts

Many may not allow manual underwriting:

• VA and FHA loans are the only two loan programs that allow manual underwriting
• Many lenders may have overlays where they will not allow manual underwriting

Gift funds:

• There are lenders that will not permit gift funds unless they have a certain credit score and/or debt to income ratio

Judgments and tax liens:

• Borrowers do not have to pay outstanding judgments and/or tax liens
• They can have a written payment agreement with the judgment creditor and/or IRS and have made three monthly payments

Timely payments in the past 12 months:

• Borrowers can qualify for VA loans with one or two late payments in the past 12 months with a good letter of explanation

Late payments after bankruptcy and/or foreclosure:

• Late payments after bankruptcy, foreclosure, short sale, deed in lieu of foreclosure is not a good thing
• However, it is not always a deal killer
• Borrowers can get an approve/eligible per automated underwriting system with late payments after bankruptcy and/or housing event
• Many lenders with overlays consider borrowers with late payment after bankruptcy and/or housing event second offenders and will not approve them

Gustan Cho Associates are one of the very few national lenders with no overlays on VA mortgages.

VA Eligibility Guidelines And Requirements Per The VA

The VA Eligibility Guidelines And Requirements are listed on the Lender’s Handbook – VA Pamphlet 27-7.

• The automated underwriting system will determine the borrower’s eligibility through the AUS
• The loan officer will input the borrower’s mortgage application, credit report, and other pertinent information in the AUS
• Within seconds, the AUS will render its automated findings
• If borrowers meet all VA agency mortgage guidelines, the AUS will render an approve/eligible per automated underwriting system
• If the AUS cannot determine its eligibility, the findings will be a refer/eligible
• Refer/eligible automated findings may qualify for manual underwriting
• All borrowers need to have a valid Certificate of Eligibility (COE)

The loan officer can help borrowers in obtaining the COE through the Department of Veterans Affair’s eBenefit portal or applying through a mortgage company. VA approved lenders have access to the WebLGY. Only borrowers who can obtain the Certificate of Eligibility (COE) are eligible to qualify for VA mortgages.

Other VA Eligibility Guidelines

To qualify, borrowers need to be an eligible veteran or a current/former reserve officer and/or member of the National Guard. The need to the DD Form 214. Statement of service by a branch of the U.S. Armed Services.

National Guard members need the following:

• NGB Form 22
• Official paperwork report of separation and record of service for each period
• NGB Form 23 and retirement points accounting with proof of the character of service

Surviving Spouse Of Eligible Veterans:

Surviving spouse of eligible veterans in receipt of Dependency and Indemnity Compensation benefits require the following to proceed:

• VA Form 26-1817
• Veteran’s DD214 if available
• For the spouse of deceased veterans not receiving Dependency and Indemnity Compensation will need to submit a VA form 21P-534, DD214, marriage license, death certificate or DD Form 1300, and mail to the appropriate PMC States

Property Tax Exemption On Disabled Veterans

There are benefits for disabled veterans at both the local and federal levels.

• Depending on the veteran’s disability, most municipalities will exempt all and/or partial property taxes
• However, the property tax exemption on disabled vets does not come into effect until the veteran has closed on their home
• They need to apply for a property tax exemption

It normally takes between six months to 18 months to get this exemption into effect depending on the county and state.

Disability Income Mortgage Guidelines

Disabled veterans can use disability income by the Veterans Administration as a qualified income. Other tax-free income can also be used as qualified income such as disability retirement income, public assistance programs, child support payments, allowances by the VA, and workman compensation benefit income. In order for other income to be used, the likelihood of the income to continue for the next three years need to be promising. Tax-free disability income can be grossed up when mortgage underwriters are calculating debt to income ratios.

Frequently Asked Questions (FAQs)

1. What are the qualifying service periods for VA home loans? Qualifying service periods vary depending on the specific dates of service. Typically, veterans must have served a minimum number of days during wartime or peacetime, according to VA guidelines.
2. How do I obtain a Certificate of Eligibility (COE) for a VA home loan? You can apply for a COE through the VA’s eBenefits portal, by mail using VA Form 26-1880, or through a VA-approved lender. The COE verifies your eligibility for a VA home loan.
3. Are there credit score requirements for VA home loans? While there’s no official minimum credit score requirement, lenders may have their standards.
4. What documentation is needed for a VA home loan application? Documentation typically includes proof of income, employment history, bank statements, tax returns, and a valid COE. Lenders may request additional documents as needed.
5. Are there property eligibility requirements for VA home loans? Yes, properties must meet VA’s Minimum Property Requirements (MPRs), ensuring they are safe, sanitary, and structurally sound. An appraisal will be made to assess the property’s value and condition.
6. What is the VA funding fee, and who is exempt from paying it? VA funding fee is just a one-time fee paid to the VA to offset the loan program’s cost. Certain individuals, such as veterans with service-connected disabilities, may be waived from paying the funding fee.
7. Can VA home loans be used to purchase investment properties or vacation homes? No, VA loans are intended for primary residences only. Borrowers must attest that they are going to occupy the property as their main dwelling within a reasonable time after closing.
8. How long does processing a VA home loan application take? The duration may fluctuate based on elements like the lender’s workload, the complexity of the application, and the efficiency of document submission. Typically, the procedure spans from approximately 30 to 45 days.
9. Can I use a VA loan to refinance an existing mortgage? Yes, VA loans offer refinancing options, including Interest Rate Reduction Refinance Loans (IRL) and Cash-Out Refinance Loans, which allow borrowers to refinance their existing VA or non-VA loans.

For more information about VA Eligibility Guidelines and requirements, please contact us at Gustan Cho Associates by calling 800-900-8569 or text us for faster response. Or email us at alex@gustancho.com. Our expert Loan Officers are available even during weekends and holidays!

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