VA Loans are one of the most valuable military benefits. These loans don’t require a down payment, don’t require Private Mortgage Insurance (PMI), often have lower interest rates than conventional loans, and may be easier to qualify for, depending on your circumstances. This article will give you a good general overview of a VA Loan.
The government guarantees about a quarter of a borrower’s mortgage, up to the VA Loan Limits, giving approved lenders a greater degree of security. In turn, that security often leads to excellent loan terms for qualified veterans.
On the whole, VA loans are typically easier to qualify for than conventional loans. They also come with some significant financial benefits. Despite that, only a fraction of the nation’s 24 million veterans have taken advantage of their VA loan benefits.
Qualifying for a VA loan
The VA has some initial criteria that prospective borrowers must meet in order to continue with the process. At this time, those considering a VA loan must be:
- Military members who’ve served 181 days on active duty or three months during war time may be eligible.
- People who have spent at least a half-dozen years in the National Guard or Reserves.
- Spouses of those killed in the line of duty.
Those who fall into one of those categories must then fill out a Certificate of Eligibility, or COE. This is an official VA document that basically certifies your ability to participate in the program. Applicants can obtain these through the VA directly or through a VA broker.
VA officials look over the Certificate of Eligibility and ultimately determine whether a prospective borrower can participate.
The VA Loan Guaranty Program doesn’t have explicit income or credit standards to qualify. But the VA does not issue loans — it guarantees them. VA-approved lenders have their own lending standards, and military members and veterans must qualify for the loan based on their financial data. Most lenders will require a credit score of at least 620. They will also consider other factors such as income, debt to income level, credit history, appraised value of the home, and more.
VA Loan Limits
The VA uses a loan limit system that limits how much a participant can borrow with a VA guarantee. Throughout most of the country, qualified borrowers can get up to $442,100 without putting down a single dollar.
That limit is higher in some of the nation’s more expensive housing markets.
Except in those high-cost areas, VA borrowers looking for a house that costs more than $424,100 must make a down payment to cover a percentage of the amount above the loan limit.
For more information about VA Loans eligibility and financing, visit our VA Loan lender page, where you can learn more about your VA Loan options.