Who Qualifies For A VA Loan?

24, October, 2023

Are you dreaming of owning your own home? If you've served in the armed forces, there's a valuable benefit you should know about — the VA loan.

VA loans offer eligible Veterans, Active-Duty Service Members, and in certain circumstances, even surviving spouses, the opportunity to achieve the dream of homeownership with favorable terms and low interest rates.

Discover who qualifies for a VA loan and what you need to know to get started on your path to homeownership.

What Is A VA Loan?

A VA loan, short for the U.S. Department of Veterans Affairs loan, is a mortgage option exclusively available to those who've served our country in the armed forces.

These loans are guaranteed by the VA, which means they come with several perks and benefits that can make buying a home more accessible and affordable.

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How Does A VA Loan Work?

VA loans are designed to help Veterans and Active-Duty Service Members become homeowners without the need for a hefty down payment or private mortgage insurance (PMI). Let's dive into some key aspects of how VA loans work.

What Is Eligibility And Entitlement?

Veterans must meet the eligibility requirements to obtain a VA-guaranteed loan. Eligibility means the Veteran meets the basic criteria of length of service (LOS) and character of service (COS) for the home loan benefit. Entitlement is the amount a Veteran has available for a guaranty on the loan. An eligible Veteran must still meet credit and income standards in order to qualify for a VA-guaranteed loan.

How Many Times Can You Use A VA Loan

One of the great things about VA loans is that there's no limit to how many times you can use them. Whether you're looking to buy your first home or your fifth, as long as you meet the eligibility criteria, you can keep utilizing this valuable benefit.  Entitlement previously used in connection with a VA home loan may be restored under certain circumstances and once restored, it can be used again for another VA loan.

Exterior of a home that qualified for a VA loan displays the American flag.

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Do VA Loans Have PMI?

Private Mortgage Insurance (PMI) can significantly increase your monthly mortgage costs. Thankfully, VA loans do not require PMI. This is a huge advantage as it can save you a substantial amount of money over the life of your loan.

VA Loan Benefits

VA loans come with a host of benefits for eligible Veterans and Active-Duty Service Members.

  • Flexibility of zero down payment (in most cases if full VA entitlement is available) and the absence of private mortgage insurance (PMI)
  • Competitive interest rates
  • Lenient credit score requirements, however, CCM does require a minimum credit score for VA Jumbo loans with a loan amount greater than or equal to $1.5M
  • Service Members with service-connected disabilities have the VA funding fee waived
  • VA offers financial counseling and assistance to help borrowers avoid foreclosure and stay on track with their mortgage payments

VA Home Loan Programs

Now that you have a basic understanding of what a VA loan is and how it works, let's explore the different types of VA loans available.

VA Purchase Loans

VA Purchase Loans are designed to help you buy a primary residence. With full VA entitlement, there is no down payment requirement, and with competitive interest rates, these loans make homeownership a reality for many who might not have thought it possible.

VA Cash-Out Refinance Loans

If you already own a home and have some equity built up, a VA Cash-Out Refinance Loan allows you to tap into that equity to pay off debt, make home improvements, or cover other expenses. It's an excellent way to leverage your home's value to improve your financial situation.

VA IRRRL (VA Streamline Refinance)

The VA Interest Rate Reduction Refinance Loan (IRRRL), also known as the VA Streamline Refinance, is a fantastic option for lowering your monthly mortgage payments.

This type of loan is designed to refinance your existing VA loan into a new one with a lower interest rate. These mortgages often come with minimal paperwork and reduced costs.

How To Qualify For A VA Loan

Now that you're excited about the possibilities of a VA loan, let's break down the requirements for eligibility:

Service History

To qualify, you must have served on active duty in the Army, Navy, Air Force, Marine Corps, or Coast Guard after September 15, 1940, and were discharged under conditions other than dishonorable.

The length of service depends on whether it was Wartime or Peacetime and when your service began. Most Veterans are eligible with 90 days or more, any part of which occurred during wartime, or 181 continuous days or more during peacetime.  

However, a greater length of service is required for Veterans who enlisted (and service began) after September 7, 1980, or entered service as an officer after October 16, 1981.

If your service dates fall within the date range above, you must have completed 24 continuous months of active duty, or the full period for which called or ordered to active duty, but not less than 90 days (any part during wartime) or 181 continuous days in peacetime.

Members of the Reserves or National Guard who are not otherwise eligible with the above-stated service history, are eligible upon completion of 6 years of service for an active or drilling status and received an honorable character of discharge. 

A general or under honorable conditions discharge does not qualify for a VA loan. Years of Service: Exceptions to the service history/eligibility requirements are numerous, including being discharged or released from service due to a service-connected disability or for other specific reasons.  VA can provide more details on these exceptions.

Eligibility of Spouses of Veterans

Some spouses of Veterans may be eligible for a VA loan.  A few examples are:

  • Unmarried surviving spouse of a Veteran, who died as a result of service or service-connected causes
  • Surviving spouses of a Veteran who dies on active duty or from service-connected causes who remarries on or after age 57 and on or after December 16, 2003
  • There are additional instances of either one-time use or full eligibility for surviving spouses, we can help you determine if this applies to you.

Certificate of Eligibility (COE)

To apply for a VA loan, (except a VA IRRRL), you'll need a Certificate of Eligibility from the VA. You can obtain this by submitting VA Form 26-1880 online or CCM can obtain it for you.  This document also determines the current entitlement amount.

Debt-To-Income Ratio

Lenders will also assess your debt-to-income ratio (DTI) to ensure you can comfortably manage your monthly mortgage payments along with your existing debts.

Service-Connected Disability

If you have a service-connected disability related to your Military service, you may be exempt from the VA funding fee, which is a one-time fee typically required for VA loans.

How To Get A VA Loan

Getting a VA loan involves several straightforward steps:

  1. Find a Lender: Start by finding a lender who specializes in VA loans and is approved by the VA.
  2. Obtain Your Certificate of Eligibility: As mentioned earlier, you'll need to apply for a Certificate of Eligibility (COE) through the VA or with the help of your lender to determine the status of your entitlement.
  3. Pre-qualification: Get pre-qualified for a loan. This step will help you understand how much home you can afford and give you a better idea of your budget.
  4. Home Search: Once pre-qualified, start your home search. Keep in mind that VA loans are typically used for primary residences.
  5. Loan Application: When you find your dream home, complete a VA loan application with your chosen lender.
  6. Home Appraisal: The lender will order a home appraisal to determine the property's value and ensure it meets the VA's minimum property requirements.
  7. Underwriting: Your loan goes through underwriting, during which your lender reviews your financial documents and makes a final decision on your loan approval.  In a few circumstances, the lender may need to send your loan documentation directly to the VA for approval.
  8. Closing: If approved, you'll attend a closing meeting to sign all the necessary documents and officially become a homeowner.
  9. Move In: Congratulations! You're now the proud owner of your new home. Move in and enjoy the benefits of homeownership.

VA loans offer the opportunity for eligible Veterans, Active-Duty Service Members, and Surviving Spouses to achieve the dream of homeownership.

If you've served our country, it's time to explore the VA loan option and take the first step towards owning your own piece of the American dream.

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