VA Loan Guidelines

The VA Loan became known in 1944 through the original Servicemen's Readjustment Act also known as the GI Bill of Rights. The GI Bill was signed into law by President Franklin D. Roosevelt and provided veterans with a federally guaranteed home with no down payment. This feature was designed to provide housing and assistance for veterans and their families, and the dream of home ownership became a reality for millions of veterans. The GI Bill contributed more than any other program in history to the welfare of veterans and their families, and to the growth of the nation's economy.
 
With more than 25.5 million veterans and service personnel eligible for VA financing, this loan is attractive and has many advantages. Eligibility for the VA loan is defined as Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continuous days during peacetime. There is a two-year requirement if the veteran enlisted and began service after September 7, 1980 or was an officer and began service after October 16, 1981. There is a six-year requirement for National guards and reservists with certain criteria and there are specific rules concerning the eligibility of surviving spouses. 
 
VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home, which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fails to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms.
 

VA LOAN GUIDELINES

BASIC REQUIREMENTS
Active Duty Personnel, Prior Service Personnel, Selected Reserve and surviving spouses may be eligible if certain additional criteria are met.

CERTIFICATE OF ELIGIBILITY
In order get a VA Mortgage, you will need a VA Certificate of Eligibility (COE). When you apply, your VA Specialist will obtain your VA Eligibility Certificate for you.

GRACE PERIOD AFTER A DISCHARGE
If you have had a foreclosure, short sale, or bankruptcy, the waiting period is between one and two years to qualify for a new VA Loan. In addition, your name needs to be removed from the CAVIRS database in order to become eligible.  

INCOME CAP AND REQUIREMENTS
There is no income cap for obtaining a VA loan. Veteran Mortgages are primarily reviewed using what is known as the residual income calculation. This calculation determines if a Veteran has enough income to cover living expenses after paying the mortgage, housing expenses, taxes and other debts like car payments or credit cards.

CREDIT SCORES
VA Mortgage approval is not completely driven by credit score, but focuses more on the borrower’s timely payments and credit history over the past 12 months. Most lenders will go to as low as 600 credit score, while others stay around the 620 and some as high as a 640 credit score requirement.

DOWN PAYMENT
100 percent financing available with no down payment required.

CLOSING COSTS
The VA Program allows for the seller to pay up to 4% of the loan amount towards the Veteran borrower’s closing costs, such as lender fees, title fees and recording fees, as well as pre-paid escrow account items for homeowner’s insurance and property taxes.

NON-ALLOWABLE CLOSING COSTS
There are certain fees that are common in real estate transactions which are considered non-allowable by VA.  The Veteran borrower is not allowed to pay these fees and they are most commonly paid by the seller when purchasing a house using VA financing.

LOAN LIMITS
The conventional VA Mortgage limit is $417,000. In certain high cost areas, the amount may be extended based on FHA guidelines for the median home price of the county in which the home is located. Veterans may also increase their loan amount by utilizing the high balance VA mortgage option which requires a down payment.  This is also known as a VA Jumbo Loan.

MORTGAGE INSURANCE PREMIUMS (MIP)
There is no monthly mortgage insurance.

UPFRONT MORTGAGE INSURANCE
The funding fee can be included in the Veteran borrowers’ loan amount. The amount of the funding fee will be dependent on several factors including down payment (if any), whether it is a first or subsequent use of VA benefits, and type of Military service. However, Veterans with a 10% or greater VA disability rating are exempt from the funding fee, as well as eligible spouses of Veterans who died as the result of service or service-connected injuries.
 
TYPE OF HOUSING
VA Loans may be used to purchase homes, town-homes and condominiums (must be a VA approved condo project), including new homes that are to be built. The property is only intended for occupancy by the Veteran and/or their immediate family, not an investment.

ACTIVE DUTY, SEPARATED & RETIRED MILITARY

Down Payment

First Use

Subsequent use

Less than 5%

2.15 percent

3.3 percent

5-10 percent

1.5 percent

1.5 percent

10 percent and up

1.25 percent

1.25 percent

RESERVES AND NATIONAL GUARD

Down Payment

First Use

Subsequent Use

Less than 5%

2.4 percent

3.3 percent

5 to10 percent

1.75 percent

1.75 percent

10 percent and up

1.5 percent

1.5 percent

ADDITIONAL RESOURCES FOR VA LOANS

CERTIFICATE OF ELIGIBILITY
US DEPARTMENT OF VETERANS AFFAIRS
REGIONAL VA LOAN CENTER
ALLOWABLE AND NON-ALLOWABLE CLOSING COSTS LIST