VA loan requirements: Eligibility and qualification

VA loans typically have no down payment and low interest rates, reducing barriers for veterans, service members, and surviving spouses looking for a house. These mortgages reduce costs and make homeownership more realistic, but only if borrowers meet specific criteria. 

VA loan requirements can be overwhelming, and misunderstanding them can lead to delays or application denial. In this article, discover who’s eligible for VA home loans and how the process works so you can secure a steady home confidently.

What’s a VA loan?

A VA loan is a mortgage designed for veterans, active service members, and certain family members. It makes home buying more accessible with favorable terms, often including no down payment, lower interest rates, and reduced closing costs.

Private lenders issue these mortgages, though the Department of Veterans Affairs (VA) insures a portion of it. This reduces the lender’s risk, allows them to include benefits, and relaxes credit standards, streamlining the VA loan approval process.

There are a few different types of VA loans to consider:

— VA purchase loan: This type of loan is most popular, and buyers can use it to purchase various properties, including homes, condos in a VA-approved project, and undeveloped land intended for new builds.

— VA cash-out refinance: The lets homeowners replace their current mortgage with a larger one and convert the remaining equity to cash.

— VA interest rate reduction refinance loan: These replace a current mortgage with one that has better terms, such as switching an adjustable to a fixed-rate loan.

— Native American Direct Loan: This allows Native Americans to purchase, build, or improve a home on federal trust land.

VA funding fee

Most VA loans include a funding fee, which is similar to private mortgage insurance. It generates the profit needed to run the program, reducing the burden on U.S. taxpayers. This charge also protects lenders if the buyer defaults, which allows providers to offer better loan terms.

This is a one-time payment that borrowers can pay up front or roll into the total loan. Depending on the terms, funding fees range from 1.5–3.3% of the property purchase price. As a general rule, first-time VA loan borrowers spend less on a funding fee, and the percentage increases after subsequent uses.

The good news is that not everyone has to pay the funding fee. Some people may be exempt, like veterans receiving service-related disability benefits and surviving spouses. 

VA loan eligibility requirements

Qualifications for a VA mortgage depend on a person’s service history and duty status, whether the home buyer is a service member or a surviving spouse. Here are the main criteria:

— Veterans: This group needs to meet requirements based on their service dates and military branch. Criteria differs per person, so it’s best to contact the VA to understand your eligibility.

— Active-duty service members: Service members who’ve served 90 consecutive days are eligible.

— National Guard and Reserve members: This group can qualify under multiple circumstances, including serving for six years or 90 days of non-training active-duty Title 10 service.

— Surviving spouses: Some spouses of people who died from service-connected causes may qualify. 

— Discharge status: A person who’s been honorably discharged or discharged under honorable conditions qualifies, while someone who’s been dishonorably discharged might not. If you don’t meet this requirement, ask the Department of Defense for a VA Character of Discharge review.

Can I still qualify if I don’t meet the VA loan service requirements?

There are a few circumstances where you can qualify even if you don’t meet the VA loan requirements. For example, people who were discharged early because of certain medical conditions still have a chance. This exemption may also apply to people discharged due to a reduction in force, hardship, or service-connected disabilities. The VA reviews each case individually, so contact them and ask which supplemental information might increase your chances of approval.

What are the requirements for a VA home loan?

Your eligibility goes beyond service requirements. Lenders will want to look into your financial situation, just like a conventional loan. Here are a few factors they’ll consider.

Credit score

Many applicants worry if the VA has a minimum credit score requirement for the loan. While the VA itself doesn’t set a minimum score, individual lenders prefer to see around 620 or higher. A strong score makes qualifying easier and may improve interest rates, but a lower score doesn’t guarantee denial. If your score is on the lower end, look for lenders who accept below-average credit scores and focus on other financial strengths, like assets and debt-to-income (DTI) ratio.

Debt-to-income ratio

A DTI ratio compares specific types of debt against your income. The lower this percentage, the better, as it means more of your income can go toward your mortgage rather than your current debts, like credit cards and car payments. For most lenders, good DTI hovers around 36%, but some may be flexible if you have steady income and a healthy savings account. At Better, there’s no DTI limit for VA loans.

Down payment

Borrowers can access zero down payment on a VA loan if they have full entitlement, which means they have the full loan guarantee provided by the VA. You have full entitlement if you’ve never used the program before, have a fully paid VA loan, or a qualified veteran assumes your previous loan. However, some buyers may choose to put money down regardless — this initial sum lowers the size of the loan and reduces the funding fee.

Residual income

VA residual income is the earnings leftover each month after paying major bills. This includes the mortgage itself, plus monthly debts. Lenders check this to ensure borrowers have enough money after loan payments to cover essentials like groceries and gas. The ideal residual income rates vary by location, so research your situation to understand where you fit.

VA home loan property restrictions

The VA wants to provide safe, livable homes for anyone using their program, so they’ll only approve the loan if a house meets specific conditions. Here are the main criteria.

Primary residence requirement

Borrowers can only use VA loans for houses they plan to live in full time. These programs secure primary residence homes and provide accessible housing for service members, so buyers can’t use the mortgage for vacation or rental properties. To prove it’s your primary residence, the VA requires you to move in within 60 days after closing.

Property condition

The VA needs to make sure the home is safe and meets Minimum Property Requirements (MPR). To qualify, the home needs the following:

— A solid structure: The property needs a stable roof and structure, free from foundational issues.

— Reliable utilities: Essentials like heating, cooling, and electricity must work properly.

— Adequate size: The home must have enough space for basic necessities. 

— Safe wiring: The home’s wiring must be safe, functional, and meet local and national electrical codes.

— Functional sanitation: The property needs clean, potable water and a functional sewage system.

— Free of certain dangerous factors: The house can’t contain lead-based paint, wood-destroying insects, fungus, or dry rot.

— Road access: The property must be accessible from a public or private street during all weather conditions.

— Non-living space access: Attics and crawl spaces must be accessible and well ventilated.

VA appraisal

Every VA loan requires a home appraisal to confirm the property value and ensure it meets MPR. The appraiser confirms the market value, which must meet or exceed the purchase price, and notes any repairs or upgrades needed to meet safety standards.

How do you apply for a VA loan?

First, gather the necessary information. While the exact requirements differ depending on your personal history and income situation, lenders typically ask for similar documents. Here’s what you need to qualify for a VA loan:

— A Certificate of Eligibility (COE), a document confirming you meet service requirements.

— DD-214 or Statement of Service, a record detailing discharge type and service dates.

— Proof of income like recent pay stubs or W-2s to verify your ability to pay.

— Two months of bank statements to prove your assets.

Now it’s time to get pre-approved. With Better, you can apply for a VA loan, get a customized rate, and start browsing properties in a few clicks. Our online platform walks you through the process in as little as three minutes, so you can enjoy a faster road to your dream home.

...in as little as 3 minutes – no credit impact

How do you get your COE?

Lenders use the COE to confirm that you meet service requirements. The easiest way to get one is directly through a VA-approved lender — these professionals have access to the VA database and can pull this document for you instantly. You can also apply for one online through the VA’s eBenefits portal or by mail using VA Form 26-1880.

Enjoy affordable loans for unique needs with Better

The VA loan program recognizes the commitments and sacrifices of service members, providing positive support that alleviates the stress of buying a home. Better makes this process even easier. Our digital platform organizes the process from start to finish, helping you get the best rates and an agent who understands your situation.

Before you start touring, apply for a pre-approval today in as little as three minutes to see what you can afford and get a strong offer letter. 

Enjoy a lightning-fast process tailored to your needs with Better.

...in as little as 3 minutes – no credit impact

FAQ

What documents do I need to apply for a VA loan?

The exact paperwork requirements will vary a little from one lender to another. In general, you’ll need your COE, income records like pay stubs, and Form DD-214 to prove your service record. 

Can I have two VA loans at the same time?

Yes, you can have two VA loans at the same time as long as you qualify for both loans and the new property will be your primary residence. However, the process is based on your remaining VA entitlement and can be complex, so it’s best to discuss this with a lender.