VA
Borrower Eligibility

The Department of Veterans Affairs (VA) guaranteed home loans are a significant benefit available to veterans, active-duty service members, and certain military spouses. These loans are designed to help eligible individuals purchase, build, or improve a home without requiring a down payment or private mortgage insurance (PMI). The eligibility requirements for VA borrowers include several factors:

Service Requirements
Borrowers must meet specific military service requirements to qualify for a VA loan. These vary depending on when and how long they served, but the general requirements include:
– Veterans: Must have served on active duty for a minimum period, usually 90 consecutive days during wartime or 181 days during peacetime.
– Active-Duty Service Members: Typically, 90 days of continuous service during wartime or 181 days during peacetime.
– National Guard and Reserves: Must serve for at least six years, or if activated for federal service, they may qualify with fewer years. Some may qualify after 90 days of active service during wartime.
– Surviving Spouses: Spouses of service members who died in the line of duty or as a result of a service-related disability may qualify for a VA loan, provided they have not remarried (with some exceptions).

Certificate of Eligibility (COE)
A COE is essential to prove that a borrower meets the VA loan requirements. It can be obtained through the VA’s eBenefits portal, or a lender can assist with acquiring it. The COE outlines the applicant’s entitlement to the loan, which may vary based on their service history.

Discharge Status
Borrowers must have been discharged from the military under one of the following conditions:
– Honorable discharge.
– Medical discharge.
– Dishonorable discharge (note: borrowers with a dishonorable discharge may still be eligible if they have had their discharge upgraded to honorable by the Department of Veterans Affairs).

Credit Requirements
While the VA itself does not have a minimum credit score requirement, lenders often impose their own credit guidelines, typically requiring a credit score of at least 580. However, some lenders may approve borrowers with lower scores depending on other factors like income, debt-to-income (DTI) ratio, and employment history.

Income and Debt-to-Income Ratio
VA loans require that the borrower has sufficient income to afford mortgage payments and living expenses. Most lenders prefer a debt-to-income ratio (DTI) of 41% or lower, but some may accept higher ratios if the borrower has other compensating factors, such as significant savings or a strong credit history.

Property Requirements
The property being purchased must serve as the borrower’s primary residence and meet VA appraisal standards. The home must be safe, sound, and sanitary to qualify. Investment properties and vacation homes are generally not eligible, but multi-unit properties (up to four units) may be if the borrower lives in one of the units.

Funding Fee
Most borrowers will need to pay a VA funding fee, which helps offset the cost of the loan guarantee program to taxpayers. This fee can vary depending on the borrower’s service category, the size of their down payment, and whether they’ve used their VA loan benefit before. However, certain groups, such as veterans with service-connected disabilities, may be exempt from the funding fee.