VA home loans have always been a great privilege for current and veteran service members and their eligible spouses. These mortgages provide competitive interest rates along with other benefits. Last year, the VA removed limits on home loans for qualifying borrowers, allowing them to have access to $0-down mortgages. It looks like the VA has no plans of revoking those limits anytime soon. If you’re planning to apply, here are some of the requirements for a VA loan in 2021.
What Is a VA Loan?
VA home loans are a mortgage option issued by private lenders and partially backed or guaranteed by the Department of Veterans Affairs. For the vast majority of military borrowers, VA loans represent the most powerful lending program on the market. It offers several advantages, including:
- No down payment requirement.
- No private mortgage insurance (PMI) requirement.
- More flexible credit underwriting.
- Low interest rates compared to typical mortgages.
What sets VA loans apart from other mortgage products is their federal backing, which gives lenders some extra security, allowing them, in turn, to provide better terms to borrowers. Anyone qualified for a VA loan can secure an affordable mortgage even with less-than-stellar credit.
VA Home Loan Eligibility Requirements
Like any other type of housing loan, there are certain criteria you must meet to become eligible for a VA home loan. The requirements are fairly simple, but you need to prepare a couple of paperwork before you can apply. The main requirements for getting a VA-backed home loan are:
- Present a Certificate of Eligibility (COE) based on your military service record. According to the VA, this generally applies to:
- Veterans who meet the minimum service requirements.
- Active-duty service members who have served a minimum period.
- Some members of the Reserve and National Guard.
- Eligible surviving spouses.
- You have to live in the home you’re buying as a VA home loan doesn’t apply to investment properties.
- Underwriting requirements still apply, including those for credit and income.
Lender’s Requirements for a VA Loan
Since you still need to have sufficient income and a suitable credit score to qualify as part of the VA home loan requirements, you might ask the question, “what credit score is needed to become eligible?” Aside from meeting the Department’s requirements, you must also meet the lender’s requirements, where your credit score and income come into play.
- VA Credit Scores – Most lenders are looking for a credit score of at least 600, but for VA loans, it’s not a hard and fast rule. If you’re slightly below that but still qualified in other areas, approval is still quite possible,
- VA Debt Ratios – Your VA debt to income ratio (DTI) should not exceed 41%, which is another requirement imposed by the lender. This may vary from one mortgage company to the next.
- VA Appraisal – Of course, any type of loan program requires homes for sale to undergo a property appraisal. Generally speaking, the worth of the house must not exceed the VA loan limit.
Conclusion
VA loans are the most significant benefit provided to our nation’s veterans. Since 2020, loan borrowers are afforded the benefit of having no cap on the size of $0 down VA loans. These requirements should help you if you ever decide to apply for a VA home loan at a trusted financial institution.
Planning to apply for a mortgage loan? PENNIX Mortgage is here to make the process a lot easier for you. While banks do what they think is best for them, PENNIX Mortgage does what’s best for you. We offer fixed-rate loans, adjustable-rate loans, FHA and VA home loans. Contact us today to start your application!
