Veterans, service members, spouses, and other eligible beneficiaries must meet the basic service requirements laid out by the Department of Veterans Affairs to qualify for a VA home loan. If you have met one or more of the following conditions you may be eligible for a VA home loan:
Served 90 consecutive days of active service during wartime.
Served 181 days of active service during peacetime.
Provided more than 6 years of service to the National Guard or Reserves.
Spouse of military member who died on active duty or as a result of a service-related disability.
Borrower’s are expected to have a stable, reliable income to cover any existing debt as well as their new mortgage payment when starting the VA loan process, in other words, residual income. Residual income is meant to cover typical family needs such as food, transportation and housing income. This extra income ensures borrowers have extra funds in the case of an emergency as well as the ability to meet all financial obligations. The VA loan process will examine the minimum amount of residual income required depending on their loan amount amount, property location and family size. Larger families in the Northeast and West typically need more residual income than similar families living in the Midwest and South, these requirements are set by the Department of Veteran Affairs. Residual income is used with a qualified borrower’s debt-to-income ratio (DTI) to determine your maximum loan eligibility amount. The lower your DTI the better, as it shows that there is a balance between how much you make and how much debt is incurred. As standard policy, the acceptable DTI for a VA loan is 41%, but can be as high as 71% depending on compensating factors.
After establishing your eligibility you will need to provide a Certificate of Eligiblity verifying your are eligible for a VA-backed loan. A valid Certificate of Eligibility (COE) must be provided as part of your loan application. Although it is not required to start the loan process, it is very important to obtain as it verifies your length and branch of service that makes you eligible to use your VA home loan benefits. Your lender can request your COE on your behalf to ensure your financing moves forward without delay but if you prefer to request your proof of military service yourself, you can do so by completing a certificate of Eligibility (VA Form 26-1880) online through the Veterans Administration’s ebenefits portal or by mail. Applying for a VA loan does not obligate you to a particular lender or to moving forward in the home loan process. To reach a VA loan expert who can answer any of your questions about the VA loan program, click here.