If you’re an active service member, veteran or surviving spouse, VA loans can offer many home financing advantages that can help you get a foothold in the housing market. Zero requirements for down payments and comparatively lower credit thresholds make these mortgages a popular option for those who qualify.
However, not everyone who served is automatically eligible. In order to qualify for a VA loan, you’ll need to meet a few requirements.
What are VA mortgage requirements?
VA mortgages are designed to help military members become homeowners at a lower cost than a conventional loan, such as a 30-year fixed mortgage. However, they do come with specific thresholds and fees that applicants will need to cover. Along with your specific service history, you’ll have to meet certain conditions related to your finances and homeownership goals.
Here’s a breakdown of the most important VA loan eligibility requirements:
- Service requirements
- VA funding fee
- Certificate of eligibility
While the VA home loan program was established to assist military members get housing, there are still a number of service requirements that determine your eligibility:
- Active duty members must have served 90 consecutive days.
- Veterans must meet the length-of-service standards, according to VA.gov.
- Service members must complete 90 days of active duty, or six years in the Selective Reserve or National Guard.
For some cases, such as discharge or service-related injury, you might be exempt from certain length-of-service requirements. These exceptions can vary from case to case, so be sure to check with the VA for your specific length of service requirement.
If you’re a surviving spouse of a military member, you may also be eligible. To secure a VA loan as a surviving spouse, you’ll need to meet a few additional requirements.
There is always a possibility for exceptions to these requirements based on your exact circumstances and service history. If you have additional questions about your specific VA loan eligibility, be sure to contact the Department of Veterans Affairs.
VA funding fee
While VA loans won’t require a down payment, there is still an upfront expense buyers will need to settle. VA funding fees are a payment made to the U.S. Department of Veterans Affairs, and help supplement the cost of VA mortgages overall.
Since the U.S. government is responsible for backing these loans, the cost is carried by U.S. taxpayers. By requiring a VA funding fee in the first stages of the mortgage process, the Department of Veterans Affairs can ease the financial burden on the public and help fund the VA loan program.
In 2021, a zero-down-payment VA loan for first-time applicants would require a funding fee of 2.3% of the home’s appraised value, according to VA.gov. On a $200,000 home, the borrower has to pay $4,600 to satisfy the expense. Considering a down payment option on a typical mortgage would require at least 20%, or $40,000, eligible VA loan applicants will still save on initial expenses, despite the VA funding fee.
This fee can either be settled as a one-time payment at closing, or folded into your monthly mortgage bill to be paid off over time.
Certificate of eligibility
Before applying for a VA home loan, some buyers will obtain a Certificate of Eligibility, or COE, to ensure that they qualify for this type of financing. Obtaining a COE allows you to demonstrate your history of military service to a lender and can be obtained by veterans, active members of the military or national guard and families of service members.
Having a COE on hand is not necessary to apply for a VA loan, as lenders are able to verify your COE status through the VA’s automated system. However, lenders use this verification process to get documented proof of the applicant’s service history and whether they are entitled to VA financing.
Proof of service requirements can vary depending on your service history and current status. They can include discharge or separation papers, history of retirement benefits or signed statements of service.
What if I don’t meet VA home loan requirements
If you’re uncertain of your own VA eligibility, you can still begin the application process through with a pre-approval. As an important step in any mortgage process, pre-approval identifies any gaps in the applicant’s ability to qualify for or sustain payments of a loan.
If you aren’t able to get pre-approved due to service requirement minimums, you may still be able to obtain a COE. Applicants who were discharged for hardship, early out, reduction in force or certain medical conditions might still be eligible.
Be sure to check with VA.gov for the most current VA mortgage requirements and whether you qualify for this type of loan. If you’ve obtained a certificate of eligibility and want to get started on your mortgage application, feel free to contact us. We can walk you through the process and answer your questions along the way.