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.
Who Can Use a VA Loan, and When?
The VA Loan can be used while the member is still serving on active duty, or after they separate from the military. Unlike certain veterans benefits which expire after a certain amount of time, VA Loan eligibility does not have an expiration date.
However, members can only have one VA Loan at a time. They may be permitted to use the VA Loan more than once, provided they have paid off their previous VA Loan or otherwise satisfied the terms of the loan.
VA Loan Eligibility – Service Requirements
The VA has some initial criteria that prospective borrowers must meet in order to continue with the process. At this time, there are two major qualifying factors for military members or veterans:
- Your character of service or discharge rating (unless still serving), and
- When you served and for how long
Character of Service (Discharge Rating)
Those considering a VA loan must have a character of discharge or service must be under other than dishonorable conditions (e.g., honorable, under honorable conditions, general), or the military member must still be serving on active duty or in the National Guard or Reserves.
Service Dates and Duration to Qualify for a VA Mortgage:
Members may qualify for a VA Loan if they meet the following service requirements:
- 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.
Let’s look at each of these in more detail.
Qualifying Military Service for VA Loan Eligibility
VA Loan Eligibility – War Time Service
World War II, Korean War, and Vietnam War Eligibility: Veterans who served in the following periods of war are eligible for a VA Mortgage if they served in the following time periods and meet the service requirements listed below.
- World War II – September 16, 1940 – July 25, 1947
- Korean War – June 27, 1950 – January 31, 1955
- Vietnam War – August 5, 1964 – May 7, 1975
- At least 90 days active duty with an other than dishonorable discharge, or
- Less than 90 days active duty if discharged for a service-connected disability
Gulf War Eligibility: Veterans who served in the following time periods are eligible for a VA Mortage if they neet the service requirements listed below.
- August 2, 1990 – to be determined
- 24 months continuous active-duty – with other than dishonorable discharge
- At least 90 days or completed the full term that he or she was ordered to active duty with other than dishonorable discharge
- At least 90 days active duty – and discharged for hardship, early out, convenience of the Government, reduction in force, condition interfered with duty or compensable service-connected disability
- Less than 90 days active duty – if discharged for a service-connected disability
VA Loan Eligibility Through Active Duty Service or Peace Time Service
Military members currently serving on active duty are eligible for the VA Loan after serving 90 consecutive days on active duty. They must reestablish eligibility through the VA after separating from active duty.
Veterans who served on active duty must meet the following requirements to be eligible for a VA Mortgage:
- 24 months continuous active duty – with other than dishonorable discharge
- At least 181 days or completed the full term that he or she was ordered to active duty with other than dishonorable discharge
- At least 181 days active duty – and discharged for hardship, early out, convenience of the Government, reduction in force, condition interfered with duty or compensable service-connected disability
- Less than 181 days active duty – if discharged for a service-connected disability
Military members currently serving on active duty will need to produce a letter from their branch of service stating they meet service requirements.
Guard or Reserve VA Loan Eligibility
In order to be eligible for the VA Loan through service in the Guard or Reserves, members must serve a complete 6-year term.
Members of the Reserve Component are eligible to apply for a VA Loan if they meet one of the following:
- Served at least 90 consecutive days on active duty during wartime.
- Served at least 181 consecutive days on active duty during peacetime.
- Completed six years of in-service time with their Guard or Reserve Unit (These must be “Good Years” to qualify).
Note: You will need to produce proof of active duty service during wartime in order to be eligible under these terms You can normally do this by providing a copy of your DD Form 214. You can also provide a copy of a Statement of Service that includes the following information:
- Full name, date of birth, and Social Security Number
- Date entered into military service
- Total number of Creditable Years of Service (also known in the Guard and Reserves as “Good Years”)
- Duration of Lost Time
- Unit Command information, including name, location, and contact information
The Statement of Service should be signed by your unit commander, his/her adjutant, or a personnel officer.
Eligibility for Military Widows and Dependents
Until recently, surviving spouses were only eligible for VA Loan benefits for a short time period. The Honoring America’s Veterans and Caring for Camp Lejeune Families Act (H.R. 1627) extended benefits to surviving spouses of veterans, veterans with a service-connected disability, and POWs for up to 10 years after the death of the servicemember (disability thresholds apply).
The intent of VA Loans is to serve as a primary residence. This becomes difficult for certain service members, including dual military couples and single parents. The new law allows a dependent to occupy the home to satisfy owner-occupancy requirements, provided certain criteria are met.
Certificate of Eligibility Required to Obtain a VA Loan
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 review the veteran’s Certificate of Eligibility and ultimately determine whether a prospective borrower can participate.
Credit Score Required for a VA Loan
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, the 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 $484,350 without putting down a single dollar.
That limit is higher in some of the nation’s more expensive housing markets. In some areas, you can use a VA Loan to purchase a home up to $1 million.
Except in those high-cost areas, VA borrowers looking for a house that costs more than $484,350 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.