You are eligible for a VA mortgage loan if you're a veteran with a status other than a dishonorable discharge. You must meet the VA's minimum standards for length of service, which vary depending on when you served and if you became disabled while on active duty. But being an eligible borrower does not mean you will be approved for a VA loan automatically.
6 Steps to VA Loan Eligibility
You must meet six requirements to qualify for a VA loan. You must:
Step 1: Obtain a Certificate of Eligibility (COE)
Your first step to getting a VA loan is making sure you are eligible. Determining your eligibility is an essential exercise. VA home loans are intended to help those who have served in the U.S. military to buy a home. Others may qualify, too. The VA sets specific requirements about your service, discharge and disability, to qualify for a VA home loan.
Veterans Eligible for VA Loans
Did you serve during World War II, the Korean Conflict, the Vietnam Era or the Persian Gulf War? If the answer is yes, you are probably eligible for a VA loan and can obtain a COE. Your active duty period must have lasted at least 90 days, but you may still be eligible if you were discharged due to a service-connected disability.
What if you didn't serve in any of these conflicts? If you served during peacetime, you're eligible if you meet any of the following requirements:
- Completed 24 months of continuous active duty
- Completed the full period for which you were called to active duty
- Discharged for a service-connected disability
- Completed at least 20 months of a two-year enlistment before a discharge for the convenience of the government
- Completed 181 days of active duty before a discharge due to hardship
- Had a service-connected compensable disability or were discharged or released for a pre-existing medical condition unrelated to your service
- Involuntarily discharged or released from active duty due to a reduction in force
- Discharged or released from active duty for a physical or mental condition that wasn't a disability and didn't result from misconduct, but which did interfere with your performance of duty
What if you're not a veteran because you're still on active duty with the Army, Navy, Air Force or Marines? If you have already served 90 days of continuous active duty, you're eligible for a VA loan, with one caveat. When an ending date is established for Persian Gulf War service, the VA will require a minimum of 181 days of continuous active duty for anyone without wartime service to be eligible for a VA loan.
Spouses of Veterans
Sometimes individuals other than veterans or active-duty service members may also qualify for a loan. Although children of veteran are never eligible for a VA loan, the spouse of a veteran is sometimes eligible.
You may be eligible for a VA loan if you are the spouse or surviving spouse of a:
If you have remarried, you may no longer be eligible for a VA loan depending on your circumstances. You may still be eligible if you remarried after turning 57 years old on or after December 16, 2003.
If you are not a veteran or the surviving spouse of a veteran, you might still qualify for a VA loan. You may qualify if you have completed six years in the Reserves or National Guard or have been discharged because of a service-connected disability, and meet any of the following conditions:
- Placed on the retired list
- Transferred to an element of the Ready Reserve other than the Selected Reserve
- Continue to serve in the Selected Reserve
You may qualify if you served another country. Certain U.S. citizens who served in the armed forces of a government allied with the United States in World War II may also qualify for a VA loan, including:
- Officers in the Public Health Service
- Cadets in the U.S. Military Academy, Air Force Academy or Coast Guard Academy or midshipmen at the United States Naval Academy
- Officers of the National Oceanic & Atmospheric Administration
- Merchant seamen with World War II service history
As you can see, the list of conditions defining VA loan eligibility is lengthy. If you are still unsure whether you qualify for a VA loan, you can contact the VA Regional Loan Center for clarification of your eligibility. You can look up the loan center and contact information for your state.
How to Apply for a COE
There's only one definitive way to learn if you qualify for a COE: Apply. Complete a VA Form 26-1880, Request for Certificate of Eligibility. Submit the completed form along with the originals or legible copies of your most recent discharge or separation papers, DD Form 214 or DD 214, the Certificate of Release or Discharge from Active Duty. If you don't have a copy of your DD 214, request a replacement copy from the National Archives.
If you are an active duty service member, reservist or a member of the National Guard, you'll need to show proof of status, usually in the form of a copy of the latest set of orders, a current military ID card or both.
Apply for a COE Online
Get your COE directly from the VA by using the VA eBenefits portal. If you need login credentials, you'll need to register first. You can also request your DD Form 214 through the VA help desk.
Apply for a COE Through Your VA Lender
Another easy way to apply for your COE is to have your lender request it for you. If you've already found an approved VA lender, you can have your loan officer request the COE electronically. Your loan officer only needs your proof of service to access your COE through the VA's Web-based application, known as Web LGY or the Automated Certificate of Eligibility (ACE) portal. Not all COEs can be retrieved through ACE. You must retrieve your COE through one of the other available avenues if the VA lacks sufficient information about you in its database.
Apply for a COE Using the U.S. Mail
Another reliable way, albeit slower, is through the U.S. postal service. Apply for a COE by sending a completed Form 26-1880 to:
Attn: COE (262) P. O. Box 100034 Decatur, GA 30031
Step 2: Determine if Your Property Is VA Eligible
VA loans give you flexibility in the type of property you purchase, the improvements you wish to complete on property you already own, and the types of mortgage loans for which you can apply.
You may use VA-guaranteed financing three ways:
You can build a new home or to buy a home. In the case of a townhouse or condominium, the VA must approve the property.
You can improve property you already occupy. For example, VA financing could pay for the installation of energy-related features, such as solar heating, a cooling system or both. VA loans apply to purchases of manufactured housing and lots. You can even buy and improve the lot on which your manufactured home sits.
Use a VA loan to pay off your current mortgage and other claims on your home and refinance an existing loan.
If the property you hope to buy or improve fits these requirements, your next step is to determine if your status also fits the VA's requirements.
The VA restricts your purchase to property located in the United States or its territories and possessions — Puerto Rico, Guam, Virgin Islands, American Samoa and Northern Mariana Islands.
Step 3: Contract to Buy a House for its Appraised Value or Less
Your property must meet the VA's Minimum Property Requirements (MPRs). The VA rules here are many, but boil down to the VA requiring the home meets local building codes, federal regulations, and HUD requirements for building safety and access. The home must be complete and contain all necessary facilities and utilities to be considered a residential property.
Your lender will order a Compliance Inspection to determine if the property meets it minimum requirements. This inspection is separate and different from an appraisal, which is an estimate of the property's market value.
Step 4: Show You Will Occupy or Intend to Occupy the Property
The VA wants borrowers to use the home as their residence. Put another way, the VA does not want veterans to use their mortgage benefit to buy investment properties. Accordingly, the VA requires the borrower to either live in the property or "use it as his or her home within a reasonable time," according to the VA Lenders Handbook. The exception to this rule are IRRRL loans.
Step 5: Prove Sufficient Income
You can be a millionaire and qualify for a VA loan. For most of us, employment and income are the two most important factors the VA considers. No matter the source of your income — a job, investments, a trust or other source — lenders want to be sure that it's stable, documented, sustainable and sufficient. Sufficient income means you can meet the mortgage payment, cover ownership costs and take care of your family's other obligations and expenses, and still have enough remaining income to support your family
Are you putting in at least 30 hours per week at a job? The VA considers this number of hours full-time employment, which helps you qualify for a VA loan. VA lenders also look into whether you've been working steadily as an indicator that you'll be able to handle the monthly mortgage payment and repay the loan in the long term. A stable work record confirms to the lender that you are trustworthy and responsible and that you probably will not become unemployed for long periods.
Expect your VA lender to ask for employment records for the last two years, including your job titles and compensation details. Your current and former employers will have to sign off on the information so make sure the information you provide is accurate. If you are a union worker, your VA lender will also request records of the union's history with you.
Some lenders also require pay stubs - usually covering the last 30 days — from your current employer. They also may request tax returns, so it's a good idea to have your W-2 forms and tax returns for the past two years on hand when you meet with a lender. Remember: It's better to have more backup information than not enough.
Why the two-year benchmark? Mortgages generally involve 30-year commitments, so lenders opt for reliable, consistent earners. A two-year history of solid employment indicates to a lender that stable earnings should continue well into the future.
Contractors, Tradespersons or Seasonal Employees
If you run your own business, your lender will look at your most recent federal income tax returns to confirm your earnings and overall net income. Here again the two-year benchmark surfaces. Your lender will look for a minimum two-year history with a sustained amount. An income showing a year-to-year gain works in your favor. Income from interest, dividends, disability, retirement or pension might count, too, but only if you can demonstrate you've received these payments for the past two years and are more than likely to continue receiving them for three additional years.
If you are an independent contractor, your VA lender will look to your 1099 instead of a W-2 to verify yearly income. If you work with only one company, your lender will require verification of employment, the same requirement for salaried employees. If you work for multiple companies, your lender will require a letter from a Certified Public Accountant (CPA) as verification of employment. If you don't use a CPA, you'll need two or more reference letters from companies you worked for.
If you are a seasonal employee who is not currently employed, your lender will look at the amount you've received in unemployment compensation. Your employer also will confirm that it's probable that you'll be rehired for the next season.
Supplementing your income with part-time work can be of benefit to your VA loan approval. Your lender will take your part-time job into account and use it in your favor if you have at least a two-year history in your job. Ultimately, your lender is looking to confirm that you'll continue in that role.
Step 6: Demonstrate Suitable Creditworthiness
The amount of debt you carry factors into your qualification for a VA loan. But how exactly do the debts you incur from day-to-day living affect your qualifications? Your VA lender will look at your debt-to-income ratio (DTI), which is the percentage of debt you carry compared to your income. Your DTI is the percentage of your gross monthly income that goes towards debts, such as house maintenance, car loans, credit card bills and other such living expenses.
The VA does not set a maximum DTI ratio. However, most VA lenders look for a DTI of 41 percent or lower. The lower your DTI, the better chance you have qualifying for a VA loan.
It's fairly simple to calculate your DTI ratio. Here's how to do it:
What is your annual gross income? $_ _ _ _ _ _ _ _ _
Divide your annual gross income ($_ _ _ _ _ _ _ _ _) by 12 to get your monthly gross income ($_ _ _ _ _ _ _ _ _/12 = $_ _ _ _ _ _ _)
Now, multiply your monthly income by 0.41 to calculate your maximum allowable monthly debt obligation ($_ _ _ _ _ _ _ x 0.41 =$_ _ _ _ _ _ _)
If your actual monthly debt obligation is less than your maximum allowable monthly debt obligation, you should be able to qualify for VA loan.
For example, suppose your annual gross income is $48,000. Divide your income amount of $48,000 by 12 to get $4,000. This is your monthly income. Next, multiply your monthly income of $4,000 by 0.41 and you come up with $1,640. You should be able to qualify for a VA loan if your actual monthly debt obligation is not more than your maximum allowable monthly debt obligation of $1,640.
Although it's easier to qualify for a VA loan if your DTI falls below 41 percent, you may still qualify even if your ratio exceeds 41 percent. You may qualify if your DTI ratio is higher due to tax-free income or if your residual income is over the acceptable limit by around 20 percent. Residual income is the amount of money left over from your paycheck after the mortgage payment, property taxes and insurance, federal and state withholdings and other debts are taken out of your gross monthly check.
What's your next step if your DTI ratio needs improvement? Consider paying off as much debt as you possibly can. A number of resources can help you accomplish this, such as do-it-yourself programs, financial websites and debt relief professionals.
Find a Co-Signer
If you cannot practically pay off your debt but still wish to apply for a VA loan, you may want to consider adding a co-signer to your loan application. Adding a co-signer may help solve your high DTI problem. A co-signer with a low DTI will lower the overall DTI of your VA loan application and put you within your lender's permissible DTI ratio range.
This strategy, however, has its limits because the VA restricts the list of eligible co-signers. Only your legally married spouse or unmarried military members can co-sign a VA loan. If you find that this option isn't feasible, perhaps you're better off sitting back for a few months and trying to get your DTI closer in line with VA lenders' expectations.
Federal Debt Repayment Requirements
Lenders understand and expect you to have debts, but the VA takes a hard stance on federal debt. If you are delinquent or in default on a federally assisted loan, the VA will deem you ineligible for a loan, and your DTI ratio is irrelevant.
Any federal debt linked to you is visible to lenders. Lenders automatically run your name through a specialized database called CAIVRS, which stands for Credit Alert Interactive Voice Response System. The U.S. Department of Housing and Urban Development maintains this system, which includes federal tax liens and information from a variety of government agencies. If your name pops up, you'll need to clean up those debts before reapplying. No exceptions.
VA Credit History Requirements
The VA does not set a minimum credit score for eligibility. Instead, the VA requires lenders to review your entire loan profile to make a lending.
Nevertheless, VA lenders set minimum score requirements. You'll find that most lenders require a minimum FICO credit score of 640, although some others set the bar at 620
This credit score requirement is called a lender overlay, which is a guideline on top of the VA minimum standard. In other words, if your scores are low and the VA lender declines your loan, you may benefit by applying at another lender. The other lender may be willing to take on your VA loan request because it sets a more relaxed or different loan requirement, such as a lower minimum credit score.
If, on the other hand, you repeatedly encounter trouble finding a VA lender willing to take on your loan, you might want to take a closer look at your credit score by reviewing the details of your credit report. Examine your report for false information, identity theft or anything else that could lower your score. Correcting any discrepancies or inaccuracies in your report could immediately raise your credit score and increase your probability of finding a VA lender to process your loan request.
VA Loan Asset Qualifications
VA loan requirements dictate that you cover certain costs associated with the loan. You or your spouse must have enough cash to:
You won't need additional cash to cover a certain number of mortgage payments, unplanned expenses or other expenses like emergencies. However, in considering your loan application and conducting its overall credit analysis, your lender may look at your ability to pay unplanned expenses. If you're selling property, the proceeds might be necessary to make a down payment or pay closing costs on a VA loan. The lender also may look at the equity you've built up in the property to determine how well you manage assets.
Restore or Reuse a VA COE
The VA limits the number of times you can use your COE to qualify for a VA loan, so if you've already used your COE before, you need to check if you can use it again to apply for another VA loan. You may have some or no benefits remaining on your COE if you want to purchase another property. To obtain approval for a new VA loan you'll have to apply to have the entitlement restored. But before you can apply to do so, you must have already paid off your first VA loan in full and sold the property linked to it. A one-time exception to this rule permits you to keep your first home and apply for a new VA loan for another home. If you use this one-time restoration allowance, you'll have to sell all property in the future if you again seek to have your entitlement restored.
What can you do if you discover you have no entitlement left as a result of a previously purchased home using a VA loan? A COE marked with "Paid in full, no restoration" means your previous VA loan has been paid off, but the VA lacks information about the status of the property you purchased with that loan.
In this case you need to update your COE by filling out VA form 26-1880, focusing on Section 8, and providing the VA with up-to-date information about the property.
VA Loan Requirements Questions and Answers
What is the difference between eligibility and prequalification?
Eligibility means you meet all of the VA loan program's requirements to participate in the program and obtain a VA loan. Obtaining a COE from the VA is proof to lenders that you are eligible for a VA loan. However, having a COE doesn't guarantee you'll get a VA loan from a lender. You still need to apply and go through the approval process for the loan. A final loan approval is only granted after your lender reviews your application and financial information and submits the paperwork to the VA.
You can help your case and move the process along by getting a prequalification for a VA loan. You don't need your COE to get prequalified. If your VA lender finds that you adequately meet certain requirements, it can prequalify you for a mortgage so that when your COE does come in, you'll be that far ahead of the game. A prequalification demonstrates to a seller of a property that your financing has a good chance of going through, and it may give you a competitive edge over other bidding buyers, especially in a hot market. You'll be ready to move onto the next step and complete the VA underwriting process and obtain final loan approval.
What is the maximum amount of a VA loan?
The VA does not set a maximum loan amount in dollars. It does, however, limit your loan amount to the lesser of the appraised value or purchase price — plus VA funding fee and energy efficient improvements, if applicable. VA lenders had capped loans to $484,350 in most of the country for 2019. In 2020 VA loan limits will go away.
If I pass away before the loan is paid in full, will the VA guaranty pay off the balance of the loan?
No. Your surviving spouse or other co-borrower remains responsible for making payments on the remaining loan balance. If there is no co-borrower involved and you are the only borrower to the loan,your loan balance and payments become the obligation of your estate. If you want to avoid passing on your mortgage obligation to your heirs, you can do so by buying mortgage life insurance from a private insurer.
How long will it take to get my loan approved?
You should plan on an average of four to six weeks to get through the loan approval process, but sometimes it takes longer for a number of reasons. For instance, your employer may be slow in returning an employment verification form, or out-of-state creditors may take longer to provide your lender with a credit rating. Occasionally, you might experience a hiccup because your lender has overlooked part of the application and sent in an incomplete application to the VA, which stalls the approval process until the VA receives the required information. You should keep your lender accountable by regularly contacting your loan officer for updates on your loan status.
Will the VA guarantee that the house I buy is free of defects?
No. The VA does not guarantee any aspect of the property you purchase. The VA guarantees the loan. In addition, the VA appraisal is not intended to be an inspection of the property. However, the VA does set minimum property requirements (MPRs), and these requirements address the accessibility, health, structural soundness and safety of the property. MPRs ensure that new construction complies with building codes and applicable regulations and requirements. But, ultimately, the VA does not guarantee that the home is a good investment is guaranteed to be free of defects. As in any type of property purchase, you would be well served to seek expert advice before you commit to buy. It's a good idea to have the house inspected - at your expense - by a qualified professional and to resolve any issues directly with the seller before you sign a contract.
My parent is an eligible veteran. Am I eligible for a VA loan, too?
VA loan eligibility does not apply to children of veterans. Children of veterans are never eligible for a VA loan. Other than veterans or active-duty service members, only surviving spouses of a veteran may be eligible for a VA loan.