VA Loan Eligibility Requirements

Applying for a VA loan can be a great financial decision because of its benefits like a zero-down payment, lower interest rates, and no PMI. But to get one, you must meet specific service qualifications and financial requirements to qualify. So let’s see if you meet the VA’s terms, and the lender’s standards for a VA loan and get one step closer to that dream of home ownership.

Who Qualifies for a VA Loan

Congress created the VA mortgage program to make it easier for eligible veterans and military servicemembers to buy homes. Only the VA can ultimately determine eligibility for the benefit, but you may be eligible if you are:

1. A veteran who has served 90 consecutive days of active duty during wartime or 181 days during peacetime with acceptable discharge conditions.
2. An active-duty servicemember who has served 90 consecutive days.
3. A National Guard and Reserve member who has served at least 6 years or served 90 days (at least 30 consecutive days) under Title 32 orders before August 2, 1990, or served 90 days of active duty after August 2, 1990.
4. A surviving spouse of a veteran who died in the line of duty or due to a service-related disability.

What is a Certificate of Eligibility (COE)?

A Certificate of Eligibility, or COE, is a document that proves your eligibility for the VA home loan benefit. The COE shows that you meet the minimum service requirements to obtain a VA loan.

The COE also includes your entitlement code, which tells the lender how much loan entitlement you have available, among other things. VA entitlement refers to the dollar amount the VA will guarantee on a VA loan, which represents the portion of the loan that the VA will repay the lender if the borrower defaults.

The requirements to obtain your COE vary depending on your service status. You can get your COE by applying through your lender, applying online through the VA’s eBenefits portal, or applying by mail to your regional VA office. Lenders will typically obtain this document for buyers during the loan process.

VA Loan Financial Qualifications

While VA loan qualifications tend to be easier than other conventional loans, VA loan lenders set some financing requirements to ensure you can comfortably afford mortgage payments. 

It’s important to note that the following requirements vary by lender, but some aspects like credit score, employment status, and debt-to-income ratios are relatively standard throughout the industry. 

This information helps lenders determine how much loan you can afford and your monthly payment terms.

Minimum Credit Score for VA Loan

There is no official minimum credit score required to get a VA loan. However, many lenders won’t accept a score below 620. Usually, a lender will pull your credit score from Equifax, TransUnion, and Experian, then take your median credit score to use for your application.

In some cases, lenders may consider other factors when preapproving you for a VA loan, such as your most recent credit history. For example, if you have a low credit score from financial decisions you made five years ago, but in the last two years you’ve made payments on time, you’ll be in better shape than someone with a low rating because of recent financial decisions/problems.

Debt-to-Income (DTI) Ratio for VA Loans

The VA does not set a maximum debt-to-income (DTI) ratio for VA loans. The DTI ratio measures your major monthly debt payments divided by your gross income and helps reflect your ability to handle new debt. Lenders prefer a lower DTI ratio because it suggests better capacity for financial obligations like a mortgage.

Guidelines for maximum DTI ratio will vary by lender, loan type and other factors. For veterans with higher DTI ratios, lenders may be willing to make exceptions because of solid credit scores or other compensating factors, such as a large down payment or significant cash reserves.

VA Loan Down Payment Requirements

As mentioned above, a major benefit of a VA loan is you aren’t required to put any money down for it. 

There are times when you may need a down payment. For example, if you’re trying to get a VA loan for a certain amount but don’t have full entitlement. In that situation, you may have to factor in the county’s VA loan limit. If that’s the case, you may need a down payment to reach the amount you’re trying to borrow. 

VA Funding Fee

When getting a VA loan, the VA will charge you a one-time upfront fee, known as the VA funding fee, to help offset the costs of the VA loan program. However, you may be eligible for a funding fee exemption if you:

• Receive compensation for a service-connected disability
• Receive Dependency and Indemnity Compensation (DIC) as the surviving spouse of a veteran
• Received a Purple Heart

You may also be eligible for a VA funding fee refund if the VA retroactively approved your disability rating to a date before you closed on the VA loan. 

VA Loan Employment Requirements

VA loan employment requirements refer to the guidelines lenders use to evaluate a borrower’s employment history and stability when considering them for a VA loan.

Lenders generally prefer borrowers with stable employment histories and a steady income track record. This typically means having at least two years of continuous employment with the same employer or in the same line of work. However, there can be exceptions to this. For example, if you are a recent college graduate who has only briefly worked in your field but has a strong employment history before, lenders may still consider you for a VA loan.

Lenders may also consider other employment-related factors, such as the borrower’s occupation, income stability, and future earning potential. They may also look at whether the borrower has a history of job hopping or gaps in employment, which could indicate a higher risk of default. If you’re receiving monthly VA disability pay, that can be reported as a stable form of monthly income. 

Lenders may require additional documentation, such as tax returns and profit and loss statements, to verify your income and employment stability if you’re self-employed.

VA Loan Property Requirements

VA loans are intended for owner-occupied properties, meaning the borrower must intend to live in the property as their primary residence. The borrower is generally required to move into the property within 60 days of closing on the loan. This is because the VA isn’t offering this type of mortgage to help people build a real estate empire. However, you could use a VA loan to get a multi-unit apartment, condo, or duplex as long you live in one of the units. 

VA Loan Inspection Requirements

The VA sets certain property requirements for a home to receive a VA loan. An independent appraiser will assess the property during the application process to see if it meets minimum property requirements. These requirements include functioning plumbing with clean water; working HVAC and electrical systems; an absence of wood-eating insects, molds, etc.; roof and kitchen quality; and adequate space for the family planning to occupy it.

Equal Housing Opportunity. The Department of Veterans Affairs affirmatively administers the VA Home Loan Program by assuring that all Veterans are given an equal opportunity to buy homes with VA assistance. Federal law requires all VA Home Loan Program participants – builders, brokers, and lenders offering housing for sale with VA financing – must comply with Fair Housing Laws and may not discriminate based on the race, color, religion, sex, handicap, familial status, or national origin of the Veteran.

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