4 Points To Consider Before Applying For a VA Home Loan
Our country is indebted to our men and women in uniform. Serving in extremely harsh conditions and adverse situations, they never even batter an eyelid to accomplish their task. Such is their dedication towards the motherland that troops invest every ounce of energy into defending our democracy from enemies domestic and foreign. As part of comprehensive efforts to thank and take care of our troops, the government offers VA loans to veterans and active military members. The loans don’t require any down-payment, mortgage insurance, or minimum credit score.These loans are extended through private lenders and partially underwritten by the Department of Veterans Affairs. Private lenders have a defined criterion for qualifying borrowers, including debt, income, and credit score requirements, together with guidelines specified by the VA department. Let’s take a look at some of the points applicants must keep in mind when applying for VA loans.
1. VA Loan Service Requirements
Potential candidates for VA loans should be in the service or have served for any one the following time periods in the United States military-
● 90 consecutive days of war-time service.
● 181 consecutive days of peacetime service.
● 6 or more years of service in the Reserves or National Guard.
Spouses of personnel who have died in the line of duty or succumbed to service-related disability, are eligible to apply for VA loans. Not only this, spouses of troops who are prisoners of war or missing in action, and spouses of totally disabled veterans, whose disability may or may not have caused their death, are eligible borrowers.
2. Certificate of Eligibility
Certificate of Eligibility (COE) is a formal document, which assures mortgage lenders that the borrower meets basic service requirements. However, it’s not mandatory for the applicant to have a Certificate of Eligibility (COE) before applying for the loan. Applicants can ask their VA-approved lender to get the CoE through Web LGY, the web portal for the Department of Veterans Affairs. Web LGY, being the VA’s web-based loan guaranty system, is only accessible to authorized VA lenders.
3. VA Loan Property Requirements
Choice of residences varies from townhomes and condominiums to single-family homes. Therefore applicants seeking VA Loans need to focus on a select group of residences to receive the final approval. Preferably, single-family homes are the standard with VA Loan criterion. Other types of housing need explicit VA approval before financing can be sought under VA loans. VA provides an interactive list of approved complexes, which provides guidelines for determining the eligibility of the potential complex. According to this list, homeowners with modular homes, which in turn, are fabricated in a factory and later assembled on the homeowner’s property, are eligible for VA Loans. On the other hand, manufactured homes are looked upon as depreciating property and finding lenders for isn’t easy.
4. VA Loan Credit and Income Eligibility
Department of Veterans Affairs does not impose the criterion for a minimum credit score for potential applicants. However, most lenders seek a credit score of 620 or higher before financing home loans. Additionally, VA works to protect borrowers, by ensuring that they can afford the mortgage they are applying for, by calculating the applicant’s debt-to-income ratio (ratio of monthly debt to gross monthly income). Usually, the VA uses the DTI benchmark of 41 percent, a higher number than that required for conventional and FHA financing. Applicants with a higher DTI are at an increased risk, as their monthly expenses could outweigh their income, and this is a red flag to lenders.
Last few words
VA home loans are highly beneficial for active defense personnel and veterans alike, due to the requirements for zero down-payment, mortgage insurance, and minimum credit score. That said, veterans with no steady income prospects or those with a higher DTI benchmark than 41 percent may face issues getting their VA home loan approved. To successfully obtain the VA Home Loan, applicants must be aware of the requisites and potential housing property options.