There are many benefits the Department of Veteran’s Affairs provides for current and former service members. One of these benefits is offering financial backing to help you purchase your dream home.
VA home loans are designed to help veterans and active duty service members find the best mortgage option. Read on for more information about what VA home loans are and how you can use them.
What Is A VA Loan?
VA loans are government-backed mortgage loans. This allows you to qualify for higher loan amounts and better loan terms. Because the Department of Veteran’s Affairs backs VA loans, lenders are more willing to lessen requirements to qualify for loans.
In addition to improving your chances of getting qualified for a loan, there are other benefits to VA home loans. They typically involve lower interest rates, zero down payment, and more.
How Does a VA Home Loan Work?
The VA does not give out loans. Rather, VA loans are loans through a private lender that are financially backed by the government. The assurance provided by the VA backing makes candidates for VA loans less risky. Lenders can then be more willing to approve loans with this added assurance.
To begin using your military benefits to buy a home, you’ll need to find a private lender that provides VA home loans. Next, you’ll apply for the loan and provide the lender with proof of your VA loan program eligibility.
Who Qualifies for a VA Loan?
To qualify for a VA loan, you’ll need to meet the minimum service requirement. You’ll need to be one following VA home loan requirements:
- A veteran
- An active duty service member
- A member or discharged member of the National Guard and Reserve
- A surviving spouse
A surviving spouse is anyone whose spouse died while on active duty or had a service-connected disability.
Once you’ve met the VA loan requirements through the Department of Veterans Affairs, you’ll still need to be approved for a VA loan from a private lender. The lender will decide if they are willing to offer you the VA home loan you’re interested in.
Verifying Your VA Loan Eligibility Status
To prove your eligibility for a VA loan, you’ll need to acquire a Certificate of Eligibility. A COE is a document certified by the VA that asserts your status as eligible for a VA home loan.
Other Ways of Getting Your COE
To get your COE, you’ll need to provide proof of military service to the VA. The documentation to do so will differ depending on which qualifications you meet to become eligible for a VA loan. Here are some examples of documentation you may need to provide.
Veterans: DD Form 214 certifying your discharge from the military. If needed, you can request this document online.
Active Duty Service Members: Statement of Service signed by your personnel officer.
National Guard Members: The documentation needed for National Guard members will differ. Activated and non-activated members will require different paperwork, as will current and discharged members.
Documents Your Lender May Require
Your lender may require financial documents from you as part of your loan application. This may involve any of the following:
- W-2s or paystubs
- Proof of employment
- Social security card
- Past bank statements
- Driver’s license
How Spouses Can Verify Their VA Loan Eligibility
Surviving spouses will need several documents to verify their VA loan eligibility. This includes a DD Form 214, marriage license, and death certificate. Additional forms through the Department of Veterans Affairs may also be required.
Other VA Loan Eligibility Requirements
After you qualify for a VA home loan, you’ll need to know how you can use your VA loan benefits. There are some conditions on what VA loans can and cannot be used for.
VA loans can be used for a variety of property types. This includes manufactured homes, condos, and even rental properties. However, there are some additional requirements to use a VA home loan for these types of properties.
Find the specific VA home loan requirements for the type of property you intend to purchase. Contact one of our experts if you are unsure about the requirements to use a VA loan for a specific type of property.
The VA does not set limits on what credit score you need to use a VA loan. However, lenders will often have a minimum credit score to approve VA home loans. Typical, the minimum credit score for VA home loans is around 600.
VA Loan Limit
The VA does not set a limit for the loan amount you can borrow. If you can qualify for the loan from a VA lender, then you can use your VA home loan. For loans above the conventional loan amount, you may need to apply for a jumbo loan. Jumbo loans may have stricter requirements to qualify.
Down Payment and Assets
One of the biggest benefits of VA home loans is that they do not require a down payment. However, if you are below the minimum credit score or are having difficulty qualifying for a mortgage loan, paying a down payment can improve your odds of loan approval.
Recipients of VA home loans also have a lower funding fee than traditional loans. VA funding fees are usually only around 1 to 3 percent of the loan amount.
When applying for a conventional home loan, you’ll usually need to demonstrate that you have a reserve of funds to pay off a certain amount of your loan. For VA home loans, the reserve fund requirements are more lax.
Do You Need Help With Your VA Home Loan Process?
Applying for a VA home loan can get complicated. Luckily, VA Loans For Vets has you covered. We know the ins and outs of the VA home loan process. For advice on how you can qualify for a VA home loan, give us a call at 602-908-5849.