Veterans, active duty members, and eligible spouses can use a VA Loan to buy a home or refinance an existing mortgage. Although VA loans are designed to make homeownership more accessible, they still have credit, debt, income, eligibility requirements, and guidelines that must be met to qualify.
Here’s what you need to know if you’re considering a VA Loan in 2024.
VA Loan Eligibility Guidelines
VA Loans are a benefit for active-duty service members, veterans, and some surviving spouses. Here’s a breakdown of the basic eligibility criteria:
1. Minimum Active-Duty Service Requirements
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- Service Members: At least 90 continuous days of active duty.
- Veterans: Service length requirements for VA loans vary depending on when and where you served but generally include 90 days during wartime or 181 days during peacetime.
- National Guard and Reserve Members: Either 90 days of active-duty service or six creditable years in the Selected Reserve or National Guard.
- Surviving Spouses: Eligibility for spouses of veterans extends to those who have not remarried after the veteran’s death or remarried after age 57 or after 16 December 2003. Spouses of service members missing in action or prisoners of war are also eligible.
2. Exceptions to Length-of-Service Requirements
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- Discharged for hardship, government convenience (after 20 months of a 2-year enlistment)
- Early out discharge (after 21 months of a 2-year enlistment)
- Reduction in force
- Left due to certain medical conditions or a service-connected disability
3. Discharge Status
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- Veterans with an “other than honorable,” bad conduct, or dishonorable discharge may not qualify but can apply for a discharge upgrade and undergo a VA Character of Discharge review process.
Documentation Required for Verifying Your VA Loan Eligibility
You’ll need a Certificate of Eligibility (COE), which can be obtained directly through the US Department of Veteran Affairs. Other documents you will need to provide are listed below:
- Veterans: Copy of your discharge or separation papers (DD214).
- Active duty service members: Statement of service.
- Current or former activated National Guard member: Your DD214, an annual point statement, or your DD220 with accompanying orders.
- Current or former activated Reserve member: A copy of your DD214 or other discharge documents.
- Current member of the National Guard or Reserve — never activated: Statement of service.
- Discharged member of the National Guard — never activated: Report of Separation and Record of Service (NGB Form 22) for each period of National Guard service, and your Retirement Points Statement (NGB Form 23) and proof of the character of service.
- Discharged member of the Reserve who was never activated: A copy of your latest annual retirement points and proof of your honorable service.
Surviving Spouses and VA Loan Benefits
If you are a surviving spouse of a veteran who died on active duty or from a service-connected disability, you may qualify for VA Loan benefits. Here’s what you need to know about the application process:
Required Documents
- Veteran’s Discharge Documents (DD214): You can contact the US National Archives and Records Administration to request the Veteran’s separation paperwork.
- Receiving Dependency and Indemnity Compensation (DIC):
- Fill out and submit the Request for Determination of Loan Guaranty Eligibility — Unmarried Surviving Spouses (VA Form 26-1817).
- Not Receiving DIC Benefits:
- Complete and submit the Application for DIC, Death Pension, and/or Accrued Benefits (VA Form 21P-534EZ) to your state’s VA Pension Management Center.
- Provide a copy of your marriage license.
- Include the Veteran’s death certificate or DD Form 1300 – Report of Casualty.
- Attach the Veteran’s separation paperwork.
For further assistance and to ensure all forms are correctly submitted, free VA loan consultation with a DSLD VA Loan Officer who can guide you through the process.
Applying for a VA Loan
- Credit, debt, and income requirements: While the VA doesn’t set a minimum credit score, most VA lenders typically require a score of no lower than 620. The VA prefers a debt-to-income (DTI) ratio of no more than 41%, but exceptions can be made based on residual income —the money remaining from income after paying debts and living expenses. It can include money received from VA disability benefits and Basic Allowance for Housing (BAH).
- Down payment requirements: VA Loans generally don’t require a down payment. However, you may need to cover the difference if the purchase price exceeds the appraised value or county loan limits. Additionally, if your credit score is below 620, a down payment might be necessary to strengthen your application.
Related Reading: VA Loans vs Other Mortgage Types
VA Appraisals
When you find a property, a VA-approved appraiser will need to assess the property’s fair market value and condition. Unlike an optional home inspection, the VA appraisal is not optional and must be completed for your loan to be approved.
Minimum Property Requirements (MPRs)
The home must meet the VA’s MPRs, ensuring it is safe, structurally sound, and sanitary. Should the property require repairs to meet the VA MPRs, these must be completed before closing, and another appraisal will be required.
Fair Market Value
The VA limits loan amounts based on the property’s fair market value. If the appraisal is lower than the sale price, you have two main options:
- Request a reconsideration of value (ROV):
- You can provide additional comparable sales (comps) to support the purchase price.
- Check the appraiser’s report for errors and present any discrepancies to your lender.
- Exit the contract:
- The VA Amendment to the contract lets you back out if the appraisal is lower than the sale price.
- If you cannot renegotiate the property price or don’t want to, you can walk away and get your earnest money deposit back.
Additional VA Loan Programs
- Disability Housing Grants: These grants help veterans with service-connected disabilities to buy or modify homes. Options include the Specially Adapted Housing, Special Housing Adaptation, and Temporary Residence Adaptation grants.
- Native American Direct Loan: This program assists Native American veterans in buying, building, improving, or refinancing homes on federal trust land. Eligibility extends to members of certain tribes and their spouses.
Arrange a free VA Loan consultation with our team of experts and get personalized assistance with VA Loan programs and applications.
VA Loan Refinancing Options
The Department of Veterans Affairs (VA) offers homebuyers the opportunity to refinance their existing mortgage with a new one with alternative conditions. Using this refinancing option, you can adjust your loan term, get a cheaper interest rate, or turn your home equity into cash.
Types of VA Loan Refinancing
There are two primary types of VA Loan refinancing:
1. Interest Rate Reduction Refinance Loan (IRRRL): Also referred to as VA streamline refinance, this option has no home appraisal or underwriting requirements. It is for current VA Loan holders seeking a lower interest rate or switching from an ARM to a fixed-rate mortgage.
Costs:
- No upfront payment of closing costs.
- A 0.5% funding fee and lender’s closing costs (can be rolled into the loan).
- Some lenders may cover closing costs in exchange for a higher interest rate.
Requirements:
- The new interest rate must be lower than the current rate unless switching from an ARM to a fixed-rate mortgage.
- The loan amount cannot exceed the existing mortgage balance.
2. VA Cash-Out Refinance: This allows homeowners to refinance and access equity for any purpose.
Costs:
- First-time VA Loan funding fee is 2.15% (as of April 2024)
- Subsequent use increases the fee to 3.3%.
- Borrowers are responsible for closing costs.
Requirements:
- Meet military service requirements
- Obtain a Certificate of Eligibility (COE)
Benefits of Refinancing to a VA Loan
VA Loan refinancing offers numerous advantages, making it a popular choice for eligible borrowers:
- No private mortgage insurance (PMI): VA Loans don’t require PMI, which can lead to considerable savings over the loan’s lifetime.
- Minimal upfront costs: The VA funding fee can be included in closing costs, potentially increasing interest over time. Fee waivers are available for service-related disabilities or spouses of deceased veterans.
- Lower interest rates: Competitive VA Loan rates often are lower than other types of home loans.
- Clear high-interest debt: VA Loan refinancing can be used to clear high-interest debt, such as credit cards or auto loans. When used to clear finance taken against a vehicle, this means you own the vehicle and are free to sell it at any time.
- No prepayment penalties: You can pay off your VA Loan early without penalties.
- Stable payments: Switch from an ARM to a fixed-rate mortgage for consistent monthly payments.
Unlock the Benefits of a VA Loan
To start your journey towards owning a home, accessing equity to pay off debt, or renovating your house, make an appointment for a free VA Loan consultation with DSLD Mortgage. Our committed team of experts is here to help you at every turn and ensure you get the best deals and conditions.
We make it easy for you to move into your dream house or take advantage of VA Loan refinancing by keeping things straightforward and stress-free.
Book Your Free Consultation Today
Article Sources
- US Department of Veteran Affairs “Eligibility for VA home loan programs.” Last accessed 10 June 2024.
- US Department of Veteran Affairs “VA disability compensation.” Last accessed 10 June 2024.
- US Department of Veteran Affairs “How to Apply for a Discharge Upgrade.” Last accessed 10 June 2024.
- Veterans Benefits Administration “Chapter 12 Minimum Property Requirement Overview.” Last accessed 10 June 2024
- US Department of Veteran Affairs “Interest rate reduction refinance loan” Last accessed 13 June 2024.
- US Department of Veteran Affairs “VA funding fee and loan closing costs” Last accessed 10 June 2024.
- US Department of Veteran Affairs “Cash-out refinance loan” Last accessed 10 June 2024.
- Veteran.com “Avoiding PMI with a VA Loan.” Updated: 27 April 2022.
