The number of veterans Affairs (VA) loans has increased exponentially in recent years due to the downturn in the US economy. Although the economic slump has resulted in banks tightening their lending standards, you will be pleased to know getting approved for a VA loan is incredibly easy. To start off, in order to be eligible for the loan you should have served in the Marine Corps, Navy, Army or Air Force. If you have served, following the VA loan guidelines for approval listed below will help increase your changes of getting that loan you need.
An Overview of The VA Loan Guidelines For Approval
Once you are determined eligible by the VA department, getting approved for the loan is the next challenge. So, how can you get approved for the loan? Well, the VA publishes a lender’s handbook which has four basic loan approval requirements the VA approved lenders use when considering giving out a loan. To understand these four VA loan guidelines for approval, continue reading.
1. VA Entitlement
As mentioned earlier, borrowers should, most importantly, first be eligible for VA home loans. So, how do you know if you are eligible? Well, the answer is simple: you will have to determine whether or not you have enough ‘Entitlement’ and have satisfied the service requirements to qualify for a VA loan. For qualification, the length of service and type of service is considered and is an important factor in the VA loan guidelines for approval process.
National Guard members are eligible to apply for a VA loan if they have completed six years of service. Other active duty members usually qualify after six months of service. However, if called on active-duty before that, reservists and National Guard members can be eligible for loans after completing six months of service. If you have served during wartime, the minimum requirement is 90 consecutive days. Potential borrowers can also apply, but only after obtaining a VA Loan Certificate of Eligibility (COE).
These borrowers can include spouses of military members, who died during active duty. So, these are the service requirements, but what about the entitlement portion of the VA loan guidelines for approval? Well, entitlement is basically a word used to determine the amount which will be guaranteed for a particular borrower. So, how much money will you get? If you have a ‘Full’ entitlement, you will be eligible for a VA home loan of $417,000, or perhaps even more depending on certain factors.
2. Property Eligibility
Now that you are eligible for a VA loan home, you will have to decide on a home and make an offer. However, please note that according to the lender’s VA loan guidelines for approval handbook, benefits are only offered for owner-occupied properties. So, what are the types of properties listed under VA home loan guidelines? Well, the Veterans Affairs lists multi-family homes, townhouses, VA-approved condos, apartments and single-family homes.
All of these properties are basically ‘Eligible’ for VA financing, but for different properties, there may be additional qualifying requirements. Furthermore, the Veterans Affairs also approves financing for manufactured homes, but only in circumstances in which they are attached to a permanent foundation. But the problem with these homes is not all lenders will be willing to approve a VA loan for a modular home.
3. Owner Occupancy
According to the VA loan guidelines for approval and VA law, veterans willing to purchase a home through a VA loan must occupy the homes they finance. What does this mean? Well, this means VA borrowers must provide some kind of verification that they will occupy their homes after the closing purchase.
Generally, this has to be done within 60 days after the closing process. But, what happens if the borrower is on duty? In these circumstances, the borrower may receive an extension of up to 12 months or perhaps even more. Is there are other way to satisfy the occupancy requirement? Yes, of course, there is, a spouse is the only relative who can complete the occupancy requirement for a VA home loan.
4. Credit & Income
Ah, of course, credit and income, the last and most important requirement in the VA loan guidelines for approval checklist. VA-eligible borrowers should qualify for the loans they obtain. And in order to qualify, the veteran must have satisfactory credit and a steady income. Of course, since it’s a VA loan borrowers are given some flexibility, but it all comes down to the lenders. Now, why is that? Well, the lenders are the ones who determine whether or not the veteran is a reliable proposition and should be approved for a VA loan.
Therefore, VA-approved lenders may set their own credit score minimums and maximums. According to the lender’s handbook, the acceptable VA debt-to-income ratio is no more than 41%. Otherwise, getting approved for a loan may be difficult. However, with a VA streamline refinance loan, veterans may not require credit-re qualifying and income.
So, now that you are familiar with the four basic VA loan guidelines for approval, getting approved for a VA loan shouldn’t be a problem. However, please note the loan amounts vary based on the borrower’s ability to pay and entitlement.