VA Loans for Buying a Home: Learn More

Use your VA loan benefit and buy a house.

Veteran and wife huggingA VA loan may be the right option if you're a home buyer looking for a great deal on the house. The Department of Veterans Affairs backs VA loans, offering some great benefits, including no down payments and, unlike a conventional loan, no private mortgage insurance. Here are the steps to get a VA quickly.

Who Is Eligible for VA Loans?

VA loans benefit eligible service members, veterans, and surviving spouses. The Department of Veterans Affairs offers these loans with reasonable rates and guidelines. You must possess a VA Certificate of Eligibility to qualify for a VA loan. You can obtain your COE through your lender or the VA.

Specific eligibility requirements must be met for a VA loan, such as having served in the military for a minimum of 90 days during wartime or 181 days during peacetime.

Do I Qualify for a VA Home Loan?

If you are looking for a VA home loan, it is essential to understand your eligibility. VA loans are designed for veterans and their spouses, so you must meet specific requirements before you can apply.

You must be a United States Armed Forces veteran, have been discharged from active duty, or be eligible for release from active duty within 12 months. You must also be a U.S. citizen or a permanent resident alien. 

Finally, you must not have had a judgment filed against you in any state or federal court. You can apply for a VA home loan if you meet these requirements. You will need to provide documentation of your status as a veteran and your discharge or release from active duty. You will also need proof of your U.S. citizenship or permanent residency. If you are interested in a VA mortgage, speak with a VA approved lender to find out more about your eligibility.

How to Buy a Home With a VA Loan

A VA-backed loan is a home loan that is backed by the U.S. Department of Veterans Affairs (VA). The VA does not lend money directly to veterans. Still, it guarantees a portion of the loan, making it easier for veterans to get mortgages with favorable terms from participating lenders.

To be eligible for a VA-backed loan, you must obtain a Certificate of Eligibility from the VA. Once you have received your certificate, you can shop for a VA lender who may offer you a VA-backed home loan. Some benefits of a VA-backed home loan include no down payment (in most cases), no private mortgage insurance (PMI), and competitive interest rates. Another perk of the VA loan program is that the seller is allowed to pay all of the closing costs on behalf of the veteran.

Additionally, minimum property requirements must be met for a home to be eligible for a VA-backed loan. The loan term for a VA-backed loan is typically 30 years, but it can vary depending on the lender.

The First Step to a Home Purchase is to Get Pre-Approved

Pre-qualification

The first step to buying a home is to get pre-qualified. This will give you an idea of how much you can afford to spend on a home and what kind of loan terms and loan amounts you may be eligible for. Once pre-qualified, you can start shopping for a home that fits your budget and get a mortgage.

Pre-qualification is different from pre-approval, and it is crucial to understand the difference. Pre-qualification will give you an idea of how much you can borrow based on your current income and debts. However, you will only get approved for a loan if you do. Pre-approval means that a mortgage lender has reviewed your credit history and financial information and has tentatively approved you for a loan up to a certain amount.

Pre-Approval

Pre-approval for your loan is a great way to ensure you can borrow the money you need. By pre-approving for a mortgage, you can determine the maximum loan amount you are eligible for. This can help to save time and money by avoiding loans that are too small or too large for your needs. A pre-approval involves the same steps a home buyer goes through after they find a suitable home. Pre-approval is a more complete evaluation.

Get a Free Credit Score Online

Credit score graphicThe first step to purchasing a home is to get your free credit report from each of the three major credit bureaus. You can also get a credit report from the three major credit reporting agencies every six months for free through AnnualCreditReport.com.

To get your free credit report from each of the three major credit bureaus, you can visit  AnnualCreditReport.com and sign in. You will be asked to provide your name, address, and Social Security number, and you will also be asked to provide your date of birth and your credit score.

You may think that getting a copy of your credit report may not be necessary since you always pay your bills on time. However, according to the findings of Consumer Reports, more than one-third, or 34%, of American citizens discovered at least one inaccuracy on their credit report. The big three credit reporting companies provide a free credit reports online.


Gather Your Papers

Here is a list of the documents that your loan officer will request:

  • Government-issued ID such as a driver's license or passport.
  • The 2 most recent months of your checking, savings and retirement accounts.
  • You will need all pages for your accounts, even the last page that you use to reconcile your deposits and payments.
  • Divorce decree with proof of alimony and/or child support (if applicable)
  • Evidence of self-employment income (if applicable).
  • Two years of federal tax returns,
  • If applicable, 1099s, commission income evidence, or evidence of income from rental properties via Form 1040 Schedule E.
  • Most recent pay stubs covering 30 days.
  • Self-employment income evidence (if applicable)
  • Social Security award letter (if applicable)
  • Two years of tax returns.
  • Two years of W-2 statements

Get Your Certificate Of Eligibility (COE)

The Certificate of Eligibility, or COE, is a document the Department of Veterans Affairs provides that verifies a service member's eligibility for a VA loan. A lender will use the COE to determine if an applicant qualifies for a VA loan. To obtain a COE, service members/lender must submit a completed VA Form 26-1880 to the VA.

Credit Score Requirements

To qualify for a VA mortgage, borrowers must have a credit score of at least 620. However, lenders may require a higher credit score for certain loan programs. For example, some lenders may require a credit score of 680 for a VA jumbo loan. Borrowers with a lower credit score may still be eligible for a VA mortgage, but they may need to provide additional documentation to the lender. The Department of Veteran's Affairs does not have a credit score requirement. That's left up to the lender to decide if the applicant is credit worthy.

VA Employment Requirement

The lender must verify that the borrower has been employed for two years. If you cannot give the lender a job history of at least two years, you will be required to explain why this is the case.

Income Requirements for a VA Mortgage

Income requirements vary depending on the loan's size and the property's location. However, the VA typically requires no more than 41% debt-to-income ratio. This means that your total monthly debt payments, including your mortgage, should be at most 41% of your monthly income. This number may also be referred to as your "debt-to-income ratio."

What is a Mortgage Debt Ratio?

Debt to income scaleYour gross monthly income includes salary, wages from side jobs or second jobs, child support, alimony, disability payments, etc. You can easily calculate this yourself with a calculator or by using a worksheet from most lenders.

Your back-end ratio is the total of your monthly debt obligations divided by your monthly income.

For example, if you have a monthly mortgage payment of $1,000 and a monthly car payment of $250, your back-end ratio would be 1,000 + 250 = 1,250.

If your monthly income is $4,000, your back-end ratio would be 31% (1,250 / 4,000). A back-end ratio of 31% means that your monthly debt obligations take up 31% of your monthly income.

Is It Easy to Get a VA Loan?

It can be easy to get a VA loan even if you have a low credit score. The credit score requirements for VA loans can be lower than other loans, and the loan limit is also generally higher. However, if you have a good credit score and meet the other requirements, you may quickly get a VA loan.

Minimum Property Requirements for a VA Loan

House with a sold signMinimum property requirements for a VA Loan are set by the Department of Veterans Affairs and outline the acceptable condition of a property that can be purchased with a VA Loan. The requirements include things such as minimum property size, age of the property, and condition of the property. If a property does not meet the Minimum Property Requirements for a VA Loan, then a veteran cannot use their VA loan entitlement to purchase the property. It is crucial to have the property inspected by a professional inspector before entering into an agreement of sale with the seller.

A VA appraisal is an independent evaluation of the home's value as determined by a trained professional. Many lenders require an appraisal to confirm that the home's value is equal to or greater than what they are lending on it. If you are buying a home with cash, you may not need an appraisal, but it's always best to check with your lender ahead of time.

After completing your final walk-through, all you are left to do is attend closing! At closing, you will sign all necessary paperwork and pay any remaining fees associated with purchasing the home. Once all paperwork has been signed, and funds have been transferred, you are now a homeowner.

Conclusion

In conclusion, buying a house with a VA loan is a great way to enter the housing market. There are many benefits to using a VA loan, including no money down and low-interest rates. If you are eligible for a VA loan, take advantage of this great program.

SOURCE:  Buy a House With a VA Loan
Recommended Reading
 VA Loan Requirements for Buyers - VAHomeLoanPlus 
 VA Interest Rates Today: See the current VA interest rates 

 The Ultimate VA Loan FAQ: Question and Answers for Veterans