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MORTGAGE KNOWLEDGE CENTER

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VA LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. VA Loan Eligibility: Step by Step

MORTGAGE

VA Loan Eligibility: Step by Step

What you'll learn: What the steps are to VA loan eligibility

EXPECTED READ TIME: 5 MINUTES

February 23, 2021

You’ve decided you’re ready to buy a home, and you’re looking into VA loan eligibility — that’s great news! VA loans are a fantastic resource for military service members, veterans, spouses, and other eligible beneficiaries who have a valid Certificate of Eligibility (COE), and a little research on these types of loans can lead to significant savings. The first, and most important piece, is proving your eligibility, so let’s walk through this process step by step.

How do I check my VA loan eligibility?

Your VA loan eligibility is determined by both the U.S. Department of Veterans Affairs (VA) and your mortgage lender, each of which has its own set of standards for approval. The VA measures eligibility against a list of service standards, which are requirements for the type and length of military service necessary to qualify. Mortgage lenders, on the other hand, are focused on your financial status and will determine eligibility based on a combination of statistics. Some of these include your income, debt, and credit score, as well as a home appraisal to confirm that the house meets the VA’s minimum property requirements.

1. Find a VA-approved mortgage lender. The first step in establishing your eligibility is to find a VA-approved mortgage lender. Look for a lender that has extensive VA loan experience and ask them about the timeline and required documents upfront. Be sure to also ask whether they’ll be able to apply for a COE on your behalf.

2. Apply for your Certificate of Eligibility. The COE is one of the documents that separates VA loans from the standard mortgage application process. Issued by the VA, it confirms that you or your spouse have met the military service requirements to be eligible for a VA loan. You don’t need a COE in-hand when you apply for a VA loan, often your lender will be able to request one electronically on your behalf. Whether you or your lender apply for the COE, you’ll need to gather documents to prove your type and duration of service.

The paperwork you’ll need for your COE application depends on the type of service performed:

  • Veterans, National Guard, and Reserve Members will require a copy of their discharge or separation papers, form DD214. You can find the full list of requirements on the Department of Veterans’ Affairs website.
  • If you’re applying for your COE individually, you can do so by completing and mailing VA Form 26-1880 to the VA, or by entering your information on the VA’s eBenefits portal.
  • If you’re applying through your lender, they’ll be able to tell you which details and documents they need from you.

3. Pre-qualify for your loan through your mortgage lender. You’ll need to be approved by your lender based on your income, job history, and debt payment history, among other factors. While your lender can walk you through this process, it’s good to know your financial status ahead of time and come prepared with the right documents. Lenders will generally want documents verifying your monthly income, debt level, and credit score. If you’re not sure what your credit score is, you can request a FICO credit report online, via your credit card company, or other bank if they offer this as a complimentary service. Your credit report will also show you any missed or late payments that you should be aware of before applying for a VA loan.

While there is no VA-imposed minimum credit score or income level to qualify for a loan, lenders are allowed to determine their own standards. These depend on the lender, with credit score minimums often falling between 620 and 660, and debt-to-income (DTI) ratio maximums of about 45-50%. You’ll want to ask about lenders’ eligibility standards at the beginning of the process to make sure you choose a lender that fits your situation.

Low credit and income or high levels of debt do not necessarily mean that you are ineligible, but you can expect better rates from your lender if you have higher scores.

4. Get a home appraisal. After qualifying with your mortgage lender, you get to do the fun part — shopping for a home. Once you find a home you’re ready to close on, the last step is ensuring that the property itself is eligible through a home appraisal. Your lender will request and schedule the appraisal from a VA-approved home appraiser, although you’ll likely be required to pay for it. The home appraiser will be checking for a few things.

  • They’ll make sure the value of the house matches what you’ve agreed to pay for it.
  • They’ll make sure that the home meets the VA’s minimum property requirements (MPRs).

MPRs are a list of requirements issued by the VA and are meant to protect you by making sure that your home is safe, stable, and sanitary. For example, only residential properties qualify, and they must have functioning heating systems and clean water access, and they must be free of health and safety hazards. You can find a list of specific requirements for your state on the VA website, and you should check it when shopping for a home to prevent surprises down the road.

What if I don’t meet the requirements?

If you don’t know if you meet the service or financial requirements for a VA loan, be sure to reach out to an experienced loan officer for help. There are a number of eligibility exceptions depending on your specific circumstances, and a loan officer can work with you to make sure you get the best deal on your loan.

To learn more about PenFed loans or determine which loan is right for you:

the Mortgage Center

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

SIMILAR ARTICLES

What Is a VA Loan?

If you are wondering if you should apply for a VA loan, PenFed Credit Union is here to explain what a VA loan is, the benefits of a VA loan, and how to apply.
woman researching VA loans on laptop

Understanding Benefits of VA Loans

If you're wondering, are VA loans worth it? Read on to discover what the benefits are of a VA loan. We'll let you know why VA loans can't be beaten.
house with american flag

What Is a VA Loan Funding Fee?

Obtaining a VA loan can be a great option for veterans and service members. PenFed Credit Union teaches you the basics of a VA loan including what a funding fee is.
writing a check for a VA loan funding fee

VA Loan Closing Costs: What to Expect

Learn all about VA closing costs. What are typical VA closing costs? Which fees do the buyer and seller pay for? Read on for basic guidelines.
man looking at VA loan closing costs
image

VA LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

VA Disclosures

1Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

*Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of September 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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You are leaving PenFed.org and entering a third party Website that is not a part of Pentagon Federal Credit Union.


The content you are about to view is produced by a third party unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Realty, LLC, see the Affiliate Business Arrangement Disclosure.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website.


The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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