Understanding VA Mortgage Requirements
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Understanding VA Mortgage Requirements
Connect with a VA Loan Expert
By clicking the 'Learn More' button above, I authorize Arbor Home Loans to contact me using an automated dialing system, even if the telephone number is a cellular phone or other service for which the party is charged. I understand that I am not required to provide this consent in order to obtain goods or services from Arbor Home Loans. I agree to receive disclosures and communications in electronic form and I confirm that I have a working computer system and an internet website browser to view this webpage and this Loan inquiry form. I agree that Arbor Home Loans may contact me by mail, telephone (mobile devices including SMS and MMS) or email in connection with my request even if my telephone number or email address appears on a Arbor Home Loans internal Do Not Call / Do Not Email List, a State or National Do Not Call Registry, a Do Not E-Mail list, or any other Do Not Contact List.
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Va Mortgage Requirements
If you’re considering a VA loan, you’re likely wondering what it takes to get approved. VA loans are designed to help veterans, active-duty service members, and their families achieve homeownership with favorable terms. We’ll cover the essential requirements, whether you're purchasing a new home or refinancing an existing one.
VA Mortgage Requirements for Approval
To qualify for a VA loan, you must meet certain eligibility criteria. These typically include:
1. Service Eligibility: You must be a veteran, active-duty service member, or, in some cases, a surviving spouse. Specific service requirements vary depending on your service period and discharge status.
2. Credit Requirements: While the VA does not impose a minimum credit score, most lenders look for a score of at least 620. At Arbor Home Loans, we consider a minimum credit score of 580. If you have concerns about your credit, don’t count yourself out—reach out to one of our VA Loan Experts. The VA loan program is generally more forgiving with lower credit scores than conventional loans. Even if your credit needs improvement, we can help you create a plan to reach your goals.
3. Income and Employment: You need a stable income and must typically meet a debt-to-income (DTI) ratio requirement of around 41%. This means your income should be sufficient to cover your mortgage payments and other monthly obligations. However, this is just a guideline. As a VA Approved Direct Lender, we encourage you to discuss your financial situation with us before making any assumptions. If you need to lower your DTI ratio, we can help you understand what that target number should be and work with you to get there.
4. Certificate of Eligibility (COE): A COE is a critical document that proves you meet the VA’s service requirements and are eligible for a VA loan. As a VA Approved Direct Lender we can help you obtain your COE. Here’s who qualifies:
- Veterans: Those who have served in the active military, naval, or air service and were discharged under conditions other than dishonorable.
- Active-Duty Service Members: Those currently serving in the military, with a minimum of 90 days of continuous active service.
- National Guard and Reserve Members: Those who have completed six years of service or have been activated for federal service.
- Surviving Spouses: The unremarried surviving spouses of veterans who died in service or from a service-related disability may also qualify.
Purchase vs. Refinance: Are VA Mortgage Requirements Different
The basic eligibility requirements for a VA loan remain the same whether you are purchasing a home or refinancing an existing loan. However, the type of refinance you choose can influence specific requirements:
VA Interest Rate Reduction Refinance Loan (IRRRL)
This type of refinance, also known as a VA Streamline Refinance, typically has fewer requirements than a purchase loan. It often does not require an appraisal, credit check, or income verification.
VA Cash-Out Refinance
If you’re looking to tap into your home’s equity, the VA Cash-Out Refinance has more stringent requirements, including a credit check, appraisal, and income verification.
Take the next step today!
Explore which VA loan is right for you and start your journey toward homeownership or refinancing. Reach out to learn more about your options and get expert guidance through the process.
VA Mortgage Down Payment Requirements
One of the most appealing aspects of a VA loan is that qualified borrowers can finance 100% of the home’s purchase price, meaning no down payment is necessary. This can be a significant advantage for those who want to conserve cash or don’t have enough saved for a down payment.
Benefits of a Down Payment on a VA Loan
While a down payment is not required for a VA loan, here’s why you might consider it:
1. Lower Monthly Payments: A down payment can reduce your loan amount, resulting in lower monthly mortgage payments.
2. Avoiding a Higher VA Funding Fee: The VA funding fee is lower if you make a down payment of 5% or more.
3. More Favorable Loan Terms: Making a down payment might improve your chances of getting a better VA Mortgage interest rate.
Using Gift Funds for a VA Mortgage
Gift funds can be used toward a VA mortgage, and they can be particularly helpful if you’re looking to make a down payment, cover closing costs, or reduce your loan amount. Gift funds must come from a relative, close friend, or an organization with a clear interest in your well-being, such as a charitable organization. It’s essential that the funds are a true gift, meaning they don’t need to be repaid. Lenders will require a gift letter from the donor, stating that the funds are a gift and do not have to be repaid. Using gift funds can make your home purchase more affordable and help you meet the financial requirements of your VA loan.
VA Mortgage Property Requirements
The home you purchase with a VA loan must meet certain requirements:
1. Primary Residence: The property must be your primary residence. You cannot use a VA loan to purchase an investment property or vacation home.
2. VA Appraisal: The property must undergo a VA appraisal to ensure it meets minimum property requirements (MPRs). This appraisal confirms that the home is safe, sound, and sanitary.
3. Occupancy Requirement: You must occupy the home as your primary residence within 60 days of closing, although there are exceptions for certain circumstances.
VA Mortgage Requirements: Eligibility for Surviving Spouses
If your spouse was in the VA and has passed away, you may be eligible for a VA loan under certain conditions:
- Unremarried Surviving Spouse: You may qualify if your spouse died in service or from a service-related disability and you have not remarried.
- Spouse of a Veteran Missing in Action (MIA) or Prisoner of War (POW): You may also qualify under these circumstances.
- Receiving Dependency and Indemnity Compensation (DIC): If you’re receiving DIC benefits, you may be eligible for a VA loan.
Property Types
Not all property types are eligible for a VA loan. Here are the main types that qualify:
Single-Family Homes: The most common type of property purchased with a VA loan.
Condominiums: Must be in a VA-approved condo complex.
Multi-Family Homes: You can use a VA loan to purchase a multi-family home with up to four units, provided you live in one of the units as your primary residence.
New Construction: You can use a VA loan to finance a new construction home, though the builder must be VA-approved.
Using a VA Loan for a Second Property
You can use a VA loan to purchase a second home, but there are specific guidelines:
Remaining Entitlement: You must have remaining entitlement after using your VA loan benefits for your first home. This remaining entitlement can be used to purchase a second home, typically in a different location if you’re relocating.
Primary Residence Requirement: As with your first VA loan, the second property must be your primary residence, not an investment property.
Learning Center
Is there a VA Construction Loan?
The VA construction loan provides a great alternative to traditional construction loans, which often require a large down payment.
What is the VA Funding Fee?
The VA funding fee is a one-time cost paid by veterans, active-duty service members, and eligible surviving spouses when taking out a VA loan. The fee applies whether you're purchasing, building, or refinancing a home, and is paid directly to the Department of Veterans Affairs.
What is a VA Assumable Loan?
A VA assumable loan offers the unique advantage of allowing a new buyer to take over the seller's existing mortgage, potentially securing a lower interest rate and better terms.