VA Loan Requirements and Guidelines


Being a veteran gives you more than just the pride of serving and your fellow citizens’ gratitude.

Veterans get a range of benefits from the federal government for serving.

This article covers all of the VA loan requirements and guidelines.

VA Loan Rates (December 2020)

Loan Term

Interest rate

APR

30-year fixed-rate

2.97%

3.18%

15-year fixed-rate

3.16%

3.36%

5/1 adjustable-rate

3.15%

3.35%

What are VA Loans?

A VA loan is insured by the U.S. Department of Veterans Affairs (VA) and offered by many lenders.  The VA program was created to help Veterans become homeowners without a downpayment, even if they have low credit scores.

The VA does not offer the loan. They insure the loan in the event a borrower defaults on the payments. There are several great benefits of VA loans, but the largest benefits are NO downpayment and no mortgage insurance. VA loans can be used to purchase or refinance a home.

VA Loan Requirements

If you’ve served in the active military for at least six months, or in the reserves or National Guard for six years, or a spouse of someone who meets these conditions, you’ll likely qualify.

Borrower Requirements

  • 580 minimum credit score
  • 50% maximum debt-to-income ratio
  • For primary residence only
  • 2.3% upfront funding fee

 

VA Service Requirements

  • Active-duty service member
  • Current or former activated National Guard or Reserves
  • Surviving spouse
  • Discharged member of the National Guard or Reserves and never activated
  • Discharged member of the National Guard and were never activated

 

Length of Time Requirements

  • Served for 90 consecutive days of active service in wartime, OR
  • Served for 181 days of active service during peacetime, OR
  • Has more than 6 years in the Reserves or Nations Guard
  • Active-duty Servicepersons
  • Servicepersons on active duty who have served for 90 consecutive days of active service
  • Reservists and members of the National Guard

 

Dishonorably discharged veterans are ineligible for VA loans

Qualifying Income

Qualifying Income:

Non-Qualifying Income:

W2 Income

lottery winnings

Overtime and bonus pay

gambling income

Seasonal positions

Unemployment benefits

Part-time income

All one-time income payments

Income from a second job

inconsistent sources of income

LES income

Single bonus payment

Child support

Income from investment properties

Self-employed income

VA Credit Requirements

Each VA lender sets its own minimum credit requirements, typically between 580-620.

  • No minimum credit score requirement (580-620 is standard)
  • 24 month waiting period after a bankruptcy or foreclosure
  • Limited debt in collections
  • No mortgage late payments in the past six months
  • No more than mortgage late payments in the past 12 months

 

VA Funding Fee

While you don’t have to have a down payment with a VA loan, there are some special fees you’ll have to pay. First, closing costs aren’t covered; you can expect to pay between 1%-4%. Second, there is a special one-time VA funding fee you have to pay instead of a down payment.

If you are getting a VA loan for the first time, you need to pay a VA funding fee equal to 2.15% of the loan amount. If you do put down 10% of the loan, this fee is lowered to 1.25%. The exact percentage will vary based on your down payment and the type of veteran you are. If you were discharged for disability reasons, this funding fee is waived.

Regular Military VA Funding Fee

Down payment

Fee (first-time buyers)

Fee (subsequent use)

0%

2.15%

 3.3%

5-10%

1.5%

 1.5%

10%+

1.25%

 1.25%

Reserve & National Guard Personnel VA Funding Fee

Down payment

Fee (first-time buyers)

Fee (subsequent use)

0%

2.4%

 3.3%

5-10%

1.75%

 1.75%

10%+

1.5%

 1.5%

VA IRRL (Cash-out refinance) Chart

Loan type

Fee (first-time buyers)

Fee (subsequent use)

IRRL's

.50%

.50%

Manufactured Home Loans

1.0%

1.0%

Loan Assumptions

.50%

.50%

VA funding fee not required if:

  • Receiving VA payments for a service-connected disability, OR
  • A veteran who would be entitled to receive compensation or if didn’t receive retirement or active duty pay, OR
  • Are a surviving spouse of a Veteran who died in service

 

VA Loan Limits

The VA no longer has VA loan limits. The maximum loan amount VA borrowers qualify for depends on their debt-to-income ratio.

Debt-to-Income Ratio

VA loan requirements do not state a maximum debt-to-income (DTI) ratio. However, lenders set their own maximum DTI requirements for these mortgages. Typically, the lender’s max DTI ratio for VA loans is between 43% and up to 50%.

  • Ability to make a downpayment
  • High net worth
  • A large amount of cash reserves
  • Minimal increase in current housing payment
  • Increased earning potential
  • High credit score