If you’re a veteran who’s thinking about buying a home or refinancing, you should definitely consider a VA loan. A VA loan has a couple of huge advantages, including the ability to buy without a down payment and a one-time funding fee in place of a mortgage insurance requirement.
Many veterans think that the process is more complex than it actually is. There are only a few major areas of qualification criteria. Let’s go over them.
Who Can Qualify for a VA Home Loan?
You must either be currently serving in the United States military or be an honorably discharged veteran.
You may be eligible if you have served:
- During peacetime (active duty) – 181 days
- Ninety days during wartime (active duty)
- Six years in the Reserves or National Guard
- Or, if you’re a surviving spouse of a service member who died in the line of duty
Service members discharged due to a service-connected disability don’t need to meet duty timeframes and their funding fee may also be waived.
How Do I Get My VA Certificate of Eligibility?
A certificate of eligibility (COE) is your official proof of your service and qualification for a VA loan. To obtain your COE from the VA you must complete VA Form 26-1880. You can also do this online. Quicken Loans can also assist you in this process if you can give us your military discharge information.
VA Loan Approval Requirements
Like other mortgages, veterans have to meet financial requirements in order to be approved for a VA loan. There are credit and income requirements that need to be met.
What Does Your Credit Score Have to Be to Get a VA Loan?
Your credit history is taken into account any time you get a mortgage. Although the VA doesn’t specify a minimum credit score that you need, lenders set their own policies.
At Quicken Loans, the minimum credit score necessary for approval is 620. This may vary depending on the type of loan approval you’re trying to get.
Income and Debt Requirements
With a VA loan, one of the really cool features of this program is the ability to afford more house. Here at Quicken Loans, well-qualified buyers can get a VA loan with a debt-to-income (DTI) ratio as high as 60%.
This ratio – a comparison of your monthly debt payments on things like housing, cars, personal loans and credit cards in relation to your monthly income – helps determine how much house you can afford.
Let’s say you make $3,600 per month. You have monthly student loan payments of $500, pay $800/month for housing, $300 per month for a car payment and a $100 per month minimum payment on your combined credit card balances. Your total DTI would be about 47.2% ($1,700/$3,600).
Another cool benefit is the ability to refinance and take out cash up to the full value of the property in most cases as long as you have a 680 median FICO score. This is applicable on loans up to $453,100 or the conforming limit in your area.
If you owe more on your home than it’s worth, you can refinance up to 120% of your property value in order to change your term or lower your rate. For existing Quicken Loans clients, the minimum FICO score is 620.
Using Your VA Loan
In order to use your VA loan, you have to obtain a COE. You also need to meet DTI and credit requirements that may be set by individual lenders.
You can only use a VA loan to get a primary property, although it may be a multiunit structure with up to four units. In addition, the veteran has to live in the home. It may be occupied by a spouse if the service member is actively deployed.
Typically, you can only use your VA loan to get one home at a time. Your entitlement is restored when the home is paid off or if the loan payments are assumed by another veteran. Other people can assume your loan, but the entitlement won’t be restored. There’s the ability to restore your entitlement on a one-time basis without selling your home in order to buy another property.
Does a VA loan sound right for you? You can check out your options online through Rocket Mortgage® by Quicken Loans®. If you’d rather get started over the phone, you can call (800) 785-4788 and one of our Home Loan Experts will be happy to speak with you. If you still have questions, feel free to leave them for us in the comments below.
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