VA Loan Eligibility: Step by Step

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.

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