“Do I qualify for the VA home loan program?”
If it isn’t the Question of All Questions when it comes to VA mortgages, it’s close. Seems like such a simple one, right? The reality is this isn’t a “Yes or No” question, at least if you’re looking for a thoughtful answer. In fact, you may not know it, but you’re actually asking two questions here, and that’s at the root of why this isn’t black-and-white.
What we’re talking about is the difference between being eligible to use the VA loan program and actually obtaining a mortgage from a VA-approved lender. They are absolutely not one and the same. So when you ask about whether you’re qualified, you’re really looking for two green lights, not just one. And one is a lot tougher to answer than the other.
Let’s deal with the first piece. There are about 1.8 million active VA loans, and millions more veterans and service members are eligible for one. The VA has set forth service requirements that prospective borrowers need to meet in order to qualify for the program. The only way to know for sure if you’re eligible is to obtain your Certificate of Eligibility (COE), which is something lenders like Veterans United often do for you.
In general, you’re likely eligible for a VA home loan if:
- You served at least 90 consecutive days active duty during wartime
- You served at least 181 consecutive days active duty during peacetime
- You otherwise served at least six years in the Guard or Reserves
- You’re the spouse of a service member killed in the line of duty or who died of a service-connected disability
Meeting the time in service requirements is the first hurdle. There are unique circumstances where it’s actually possible to be eligible for a VA home loan with less time in service, but those are rare and often medical-related. That’s why when it comes to eligibility the VA has the ultimate say, which comes in the form of that Certificate of Eligibility.
It sounds a bit odd given all of that, but you don’t actually need your COE to start the VA home loan process. Lenders can generally tell if you’re eligible depending on what you tell them, and they’ll often obtain the document for you once you’re in the process.
The second part of the question is the big one. Being eligible for a VA loan doesn’t guarantee you’ll get one. Part of the reason is the VA doesn’t actually make home loans. Instead, it basically provides a form of insurance on loans made by private VA-approved lenders. The VA generally agrees to pay a lender 25 percent of the loan amount if the borrower defaults. That financial “guaranty” is different from a “guarantee,” and it gives lenders the confidence to extend no-down payment financing to those who’ve served our country.
But lenders are still on the hook for the majority of the loan should the borrower default. Because of that lingering risk, lenders can and will have requirements that go above and beyond what the VA needs to see, such as requiring prospective borrowers to meet a credit score requirement. This is where answers to the big question start to become murky. Now when we’re talking about qualifying for a VA loan, we’re looking at things like credit score, debt-to-income ratio, residual income and other financial metrics, many of which will change depending on the interest rate and the loan amount you’re seeking.
In other words, we’re talking about whether you can actually make it to closing day. That’s a much more difficult question to answer, mostly because it depends on so many variables, some of which have nothing to do with you and everything to do with the property you hope to purchase.
The reality is you really can’t get a clear answer to this big question of qualifying for a VA mortgage at the beginning of the process. You can determine your eligibility, absolutely. But it’ll take talking with a VA loan specialist, getting your credit pulled and running some financial numbers in order to get a clearer picture of your ability to secure home financing — and even then there are no guarantees. There’s a reason it’s called loan prequalification and preapproval.
I’d encourage you to talk with a Veterans United loan specialist at 855-524-7279. They’ll soon be able to tell whether you’ve got the credit and financial profile to bring this dream closer to reality.