December 09, 2020 | Updated December 4, 2023
If you’re an eligible active-duty military member, a veteran or a surviving spouse of a servicemember, you may be able to use a VA home loan — backed by the U.S. Department of Veterans Affairs (VA) — to buy a new property or refinance an existing mortgage. VA loans come with some big perks — like no need for a down payment. And they can be a really attractive options when it comes to buying a home. Let’s take a look at how VA loans work, and how to get one.
Do you qualify for a VA loan?
To qualify for a VA loan, you’ll need to successfully complete a three-part process involving the VA, a VA-approved mortgage lender, and a home appraiser. The first two steps qualify you for the loan and the third step qualifies the property:
- The VA determines if you qualify for a VA loan based on the type and length of your service, most commonly through a form called a Certificate of Eligibility (COE).
- Once the VA issues you a COE, then the mortgage lender conducts reviews of your income, debt, credit, and other financial information.
- You are then required to have a VA-approved home appraiser check the property to ensure it meets the VA's Minimum Property Requirements (MPRs). This process is different than a typical home inspection.
What are the service requirements for a VA loan?
First, make sure both the type and duration of your service meet the VA’s requirements. If you fall into at least one of the categories on each of the lists below, you may be eligible for a VA loan.
Type of service:
- Active-duty personnel
- Members of the Reserve
- Members of the National Guard
- Some surviving spouses
Length of service:
- 2 years on active duty
- 90 days of wartime duty
- 181 days of peacetime service
- 6 years in the Reserve or National Guard
If you or your spouse’s service doesn’t fall into one of these categories, or you’re not sure, you may still be eligible. You can find a detailed list of requirements on the U.S. Department of Veterans’ Affairs website. If you still have questions, a PenFed loan officer would be happy to help you.
What is a Certificate of Eligibility (COE)?
One way to be sure you meet the VA loan service requirements is to get a Certificate of Eligibility (COE). A COE is a document issued by the VA that proves to the lender that you have met the initial service qualifications for a VA loan. You can apply for a COE through:
- A VA-approved home loan lender
- The VA eBenefits portal
- The VA Form 26-1880, which you can fill out and return by mail
What is the minimum credit score for a VA loan?
There is no VA-dictated minimum credit score requirement for qualification. Instead, lenders are allowed to determine their own minimums, which usually fall between 620 and 660. In addition to credit score, the VA requires that you maintain a certain amount of money each month — after all major expenses are paid. The excess is meant to cover typical family needs — food, transportation, and medical care — and is known as “residual income.” When planning to buy a home, whether through a VA loan or other type of mortgage, it’s important to understand what your total housing costs will be and if you can afford to buy a home.
What are the income requirements for a VA loan?
Once the lender has confirmed the service requirements through the COE, they will review your income, debt, and credit to assess whether you qualify financially for the loan. There are no standard income or debt requirements, but lenders will often check an applicant’s debt-to-income (DTI) ratio. DTI is calculated by dividing monthly debt obligations by gross monthly income. A ratio of less than 41% is considered good, although a higher ratio isn’t necessarily disqualifying. If you can show that you have enough residual income after paying necessary monthly expenses to pay for food, medical care, and other costs, you may still be approved.
How long does it take to get a VA loan?
There are a few factors outlined above that can affect the length of time necessary to obtain a VA loan — specifically, obtaining a Certificate of Eligibility (COE). If you don’t have one, you can learn more and apply on the VA’s website. It can take about six weeks to get your COE. You’ll also need to apply for the loan through your lender, which can take approximately 30-45 days.
Why do I need a home appraisal?
A vital step in qualifying for a VA loan is the home appraisal. Once your lender submits an order for one, the VA will find a VA-approved home appraiser who will check the property to make sure it is safe, secure, and sanitary. The appraiser is different from a home inspector. They will check that the property meets the VA’s minimum property requirements (MPRs), and determine the market value of the property.
Once you’ve completed the COE, financial qualification, and home appraisal, you’ll know that both you and your property are qualified for a VA loan. Then, you’ll be ready to close the deal and move in.