12 Feb What Are The Requirements To Qualify For VA Loan Benefits?
VA home buyers must fulfill the requirements established by the Department of Veterans Affairs. Besides, some lenders may also require the applicants to submit additional documents to determine their eligibility. As the VA doesn’t provide the loan itself, lenders have their own VA loan qualification guidelines.
Eligibility for VA Home Loans –
To obtain a VA loan, you must fulfill any of the following requirements –
• You must be an eligible veteran with an available entitlement.
• You can only apply for the loan if you wish to purchase a home.
• Once the loan is closed, you must acquire the new property or intend to occupy the property as your primary residence within a reasonable period. The requirements may vary from lender to lender.
• Though you don’t need to have a high credit score to qualify for VA loans, some lenders may consider applicants with credit scores between 600-650.
• You must have the documents showing your income, ability to pay off the loan, cover the costs of owning a home, other expenses, and savings to support the family.
Some VA lenders may want to know about your income, credit history, debt-to-income ratio, and other financial details.
DTI Ratio & Credit Score
The VA doesn’t require veterans to have a specific credit score to qualify for VA loan benefits. However, as mentioned earlier, most private lenders require VA applicants to have a credit score of 650.
Similarly, some lenders would calculate an applicant’s debt-to-income (DTI) ratio before sanctioning the loan. It is a metric used to compare an applicant’s monthly income and debt repayments. Despite the VA requiring VA loan borrowers to have a 41 percent DTI ratio or lower, most lenders often entertain applicants with a higher DTI ratio.
The VA also requires Veterans to showcase their residual income or monthly income saved after paying off debts and obligations. Residual income is considered essential to ensure that the applicant can cover the household expenses and other basic living costs. It varies based on the applicant’s family size and the native county. The residual income requirement is the reason for fewer defaults and a nominal foreclosure rate.
VA appraisal is the process of assessing the market value and condition of the property. It is a mandatory step in the VA loan process. VA appraisal should not be mistaken for a home inspection, which is a more elaborative process.
The VA appraisal helps determine an estimated price of the chosen property so that it can be compared with other options. The process also includes the appraiser checking the property’s condition against the VA’s Minimum Property Requirements (MPRs). The VA strives to help veterans buy homes that are safe for living.
These are the basic requirements to qualify for VA loan benefits. We recommend you consult an experienced VA loan broker to understand the other loan requirements.