VA Loan Eligibility
The dedicated men and women who proudly serve in the U.S. military are entitled to a wide range of benefits available to them. The primary option available within these benefits is the VA Loan Program. This is an alternative mortgage option to traditional lending options which provides an incredible advantage to active duty and retired military men and women as well as their families.
This program allows the purchase or refinance of a loan for qualifying veterans or active duty personnel with absolutely zero down, no private mortgage insurance (PMI), very low rates and relaxed credit guidelines.
USAVA offers you an incredible opportunity to purchase your dream home with programs designed specifically to make purchasing a new home or refinancing an existing VA Loan affordable and easy! Learn more about your eligibly for these programs in the sections below.
You may be eligible if you meet one of the following conditions:
In order to qualify for a VA Loan there are specific service conditions each borrower must meet. This must include just ONE of the following:
- You have served 90 consecutive days of active service during wartime
- You have served 181 days of active service during peacetime
- You have more than 6 years of service in the National Guard or Reserves
- You are the spouse of a service member who has died in the line of duty or as a result of a service-related disability.
If you have any specific questions about your particular situation, we would welcome the opportunity to speak with you about it.
VA Refinance Eligibility
An IRRRL can only be made to refinance a property on which you have already used your VA loan eligibility. It must be a VA to VA refinance, and it will reuse the entitlement you originally used.
- A Certificate of Eligibility (COE) is not required. If you have your Certificate of Eligibility, take it to the lender to show the prior use of your entitlement.
- No loan other than the existing VA loan may be paid from the proceeds of an IRRRL. If you have a second mortgage, the holder must agree to subordinate that lien so that your new VA loan will be a first mortgage.
- You may have used your entitlement by obtaining a VA loan when you bought your house, or by substituting your eligibility for that of the seller if you assumed the loan.
- The occupancy requirement for an IRRRL is different from other VA loans. For an IRRRL you need only certify that you previously occupied the home.
A new Certificate of Eligibility (COE) is not required. You may take your Certificate of Eligibility to show the prior use of your entitlement, or your lender may use our e-mail confirmation procedure in lieu of a certificate of eligibility.
VA does not set a cap on how much you can borrow to finance your home. However, there are limits on the amount of liability VA can assume, which usually affects the amount of money an institution will lend you. The loan limits are the amount a qualified Veteran with full entitlement may be able to borrow without making a down payment. These loan limits vary by county, since the value of a house depends in part on its location.
The basic entitlement available to each eligible Veteran is $36,000. Lenders will generally loan up to four times a Veteran’s available entitlement without a down payment, provided the Veteran’s income and credit qualified and the property appraises for the asking price.
VA Loan Income Requirements
Homebuyers interested in the VA Loan aren’t required to reach any kind of income threshold to use their home loan benefits, however, borrowers are expected to have stable, reliable income that will cover monthly expenses including their new mortgage payment. The VA requires that borrowers maintain a certain amount of income left over each month after all major expenses are paid. The excess is meant to cover typical family needs, such as food, transportation and so forth and is referred to as residual income. Residual income is a large reason why the VA Loan maintains one of the lowest foreclosure rates of all major lending options.
By enforcing residual income requirements, the VA increases the chances of its borrowers earning sufficient income to meet all financial obligations, and also ensures borrowers have a cushion in the event of an emergency.
When you apply for a VA Loan, your Mortgage Specialist from Veterans United will pull your credit score from the three leading credit agencies and examine your debt-to-income ratio.
Finally, a veteran applying for a VA Loan must not have been discharged under dishonorable conditions.
VA Funding Fee
Generally, all Veterans using the VA Home Loan Guaranty benefit must pay a funding fee. This reduces the loan’s cost to taxpayers considering that a VA loan requires no down payment and has no monthly mortgage insurance. The funding fee is a percentage of the loan amount which varies based on the type of loan and your military category, if you are a first-time or subsequent loan user, and whether you make a down payment. You have the option to finance the VA funding fee or pay it in cash, but the funding fee must be paid at closing time. You do not have to pay the fee if you are a:
- Veteran receiving VA compensation for a service-connected disability, OR
- Veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active duty pay, OR
- Surviving spouse of a Veteran who died in service or from a service-connected disability.
The funding fee for second time users who do not make a down payment is slightly higher. Also, National Guard and Reserve Veterans pay a slightly higher funding fee percentage. See Loan Fees for more information about loan costs. Some lenders offer IRRRLs as an opportunity to reduce the term of your loan from 30 years to 15 years. While this can save you money in interest over the life of the loan, you may see a very large increase in your monthly payment if the reduction in the interest rate is not at least one percent (two percent is better). Beware: It could be a bigger increase than you can afford.