To be eligible for a VA loan, you must be able to demonstrate dependable income, strong credit, and a Certificate of Eligibility (COE) that is valid. You must also intend to use the home for which you will use the loan as your primary residence. But that’s not all. The following requirements are also taken into account on VA loans.
Basic Service Requirements
- 181 or more days of continuous active duty during peacetime
- 90 or more consecutive days on active duty during wartime
- A total of 6 years in the Selected Reserves or National Guard
Your first step in qualifying for a VA Loan should be to apply for a Certificate of Eligibility by completing and submitting VA Form 26-1880, a request for a COE, especially for home loan benefits. This is usually submitted along with your military service documents at a VA center.
Another way of obtaining your COE is to work with the VA loan experts at MortgageAdvisor.com, who can also assist you in obtaining any other documents needed for the VA loan program.
Purpose of VA Home Loans
The VA home loan program exists to help members and veterans of the Armed Forces secure home loans with better terms and lower interest rates than other loan types, like FHA and conventional loans, available to non-veterans.
A VA Loan can be used to:
- Build a home
- Purchase and improve a home
- Buy a home or condominium unit in a VA-approved project
- Buy a manufactured home or lot
- Install energy-related improvements
Explanation of Service Requirements
Traditionally, the VA loan program was especially for veterans who had actively served in the Armed Forces after WWII and had been honorably discharged. This is reflected in the requirements eligibility for VA loans. Applying veterans are required to have at least 90 days of service during wartime and active duty. Veterans who served only during peacetime, even active duty members, are required to have 180 or more days of service to qualify for VA loans. Those veterans who were enlisted and served after 1980 and officers who served after 1981 must have proof of serving two or more years to be eligible.
Explanation of Loan Approval vs VA Eligibility
The qualifications for VA loans is markedly different than those for FHA or conventional loans. For instance, a veteran cannot qualify for a new VA loan unless he has either sold his home and paid the loan off completely or still owns the home but has the loan fully paid off. Through assumption, you can also transfer your loan to another qualifying veteran and transfer that veteran’s entitlement to you.
Beyond VA eligibility requirements, VA loans also come with a slew of approval requirements. As with other types of loans, the VA loan program does not allow discrimination on the basis of religion, race, age, sex, or color, but this doesn’t mean that everyone who is eligible is approved for a VA home loan. The actual qualification requirements around VA loans can vary, mostly because lenders can be very flexible in the criteria they apply to VA loans because the VA is not the lender in a VA loan transaction, but the guarantor.
This means that obtaining a COE is only the beginning of your VA home loan process. Once you have your COE, you must identify the approved purpose for the loan—will you purchase a house, a condo, or a townhouse?—with the intent to live in the property as your primary residence.
Also different from conventional and FHA loans is how the VA loan program approaches credit requirements. Conventional and FHA loans often base loan approval on the applicant’s credit score, which can end many veterans’ home-buying aspirations, especially those with poor credit scores. VA loans, however, weigh credit scores less heavily, focusing more on veterans’ payment and credit history over the last 12 months. This means that any liens, judgments, or collections on your credit history within the last 12 months can hurt your chances of qualifying. But if you keep your eye on those payments and credit usage for a solid 12 months, you can greatly improve your chances of getting approved for a VA loan.
Other Eligibility Beneficiaries
There are other non-veteran groups that are eligible for VA home loan benefits, including:
- Unmarried spouses of veterans
- U.S. citizens who served in the armed forces of any government allied with the United States during WWII
- Cadets at Armed Forces Academies
- Navy Midshipmen
- Public Health Service officers
- National Oceanic & Atmospheric Administration officers
- Merchant seamen with WWII experience
Restoration of Entitlement
Once a veteran has used their VA loan entitlement once, it is possible for veterans to have their entitlement restored to purchase another home via a VA Loan if:
- They sell the property purchased previously with a VA loan, and that loan has been paid off completely.
- The veteran has paid off the previous VA loan in full but has not disposed of the property.
- A qualified veteran agrees to assume the original VA loan and transfer his entitlement for the same amount of entitlement originally used by the Veteran seller.
If you’re looking to see if restoration of entitlement is an option for you, you can request it by submitting VA Form 26-1880 with the VA Eligibility Center.