Qualifying for a VA Home Loan
VA home loans are guaranteed by the Department of Veterans Affairs. The loans are made by lenders who are required to follow VA guidelines. It is important that the lender be experienced in closing VA loans in order to qualify the veteran and take advantage of all of the program’s benefits.
In terms of qualifying for the loan, there are four areas to consider:
Military Service
To qualify for a VA loan, the borrower must have served in some branch of the military or military reserves for a sufficient period of time. Generally for full time active duty, this requires 2 years. Reserve duty varies depending on the nature of duty. To find out if you qualify you should request a Certificate of Eligibility from the Department of Veterans Affairs. Contact your First Equity representative for assistance.
Credit
Since VA offers 100% financing, veterans must have a reasonably good credit history. Generally, the minimum credit score is 620. The underwriter will review the total credit history, with emphasis on the past 12 months. Timely rental or housing payments are very important. Bankruptcies or foreclosures must be at least twenty-four months old. Outstanding collections or judgments may have to be paid off to qualify.
Income
Veterans must have a stable source of income, and a reasonable balance between income and debts. Generally, the total debt should not exceed 42% of gross (pre-tax) income. Income from part time jobs, bonuses or commissions can be counted if there is a 2 year history.
Collateral
The house to be purchased (or refinanced) will be appraised by a VA approved appraiser. The VA will pick the appraiser, and in addition to looking at value, the appraiser will be looking for items that could need major repairs (such as roof, furnace, foundation). If there are any visible problems, additional inspections may be required to insure that the house is in good condition.