This ARTICLE On VA Eligibility Guidelines And Requirements On VA Home Loans Was PUBLISHED On November 20th, 2019
The U.S. government created and implement VA loans to reward active-duty and retired members of the U.S. Military to show their appreciation of serving our country.
- Only U.S. Armed Services veterans who meet the VA Eligibility Guidelines And Requirements can qualify to obtain a Certificate of Eligibility (COE)
- You need a valid COE to meet the VA Eligibility Guidelines And Requirements to qualify for VA mortgages
- VA loans are the best loan program for owner-occupant borrowers
- There are no down payment requirements on VA home loans
- The VA will guarantee lenders who originate and fund VA loans in the event the borrowers defaults and/or forecloses on their VA loan
- This only holds true as long as they meet the VA Eligibility Guidelines And Requirements
- There is no minimum credit score requirements nor debt to income ratio caps on VA mortgages as long as the borrower can get an approve/eligible per AUS
- There are no maximum loan limit caps on VA loans
- VA Eligibility Guidelines And Requirements are the most lenient than any other loan program
In this article, we will cover and discuss VA Eligibility Guidelines And Requirements On VA Home Loans.
VA Eligibility Guidelines And Requirements Versus Lender Overlays
The U.S. Department of Veterans Affairs sets the VA Eligibility Guidelines And Requirements.
- All lenders need to meet the minimum agency VA Eligibility Guidelines And Requirements
- However, each lender may impose higher credit and income guidelines on VA loans called lender overlays
- Most lenders have overlays
- Gustan Cho Associates has no lender overlays on VA loans
We just go off the minimum VA Eligibility Guidelines And Requirements imposed by the VA and have no other overlays.
Mortgage companies can impose lender overlays on just about anything. Lenders can have overlays and tougher underwriting requirements on the following:
- The VA does not have a minimum credit score requirement as long as the borrower has an approve/eligible per AUS
- However, most lenders have overlays on VA loans where they may require a 620 to 640 credit score
- Having high credit scores on VA loans is important because it determines mortgage rates
Debt to income ratios:
- The VA does not have a maximum debt to income ratio cap on VA mortgages
- Most lenders may cap debt to income ratios on VA loans at 45% to 50% DTI even though the VA does not require it
- The automated underwriting system normally will render an approve/eligible per AUS on borrowers with strong residual income
- Outstanding collections do not have to be paid to qualify for VA loans
Outstanding charged-off accounts:
- Outstanding charged-off accounts do not have to be paid
- Taking 5% of outstanding collection account balance does not apply on charged-off accounts
Many may not allow manual underwriting:
- VA and FHA loans are the only two loan programs that allow manual underwriting
- Many lenders may have overlays where they will not allow manual underwriting
- There are lenders that will not permit gift funds unless they have a certain credit score and/or debt to income ratio
Judgments and tax liens:
- Borrowers do not have to pay outstanding judgments and/or tax liens
- They can have a written payment agreement with the judgment creditor and/or IRS and have made three monthly payments
Timely payments in the past 12 months:
- Borrowers can qualify for VA loans with one or two late payments in the past 12 months with a good letter of explanation
Late payments after bankruptcy and/or foreclosure:
- Late payments after bankruptcy, foreclosure, short sale, deed in lieu of foreclosure is not a good thing
- However, it is not always a deal killer
- Borrowers can get an approve/eligible per automated underwriting system with late payments after bankruptcy and/or housing event
- Many lenders with overlays consider borrowers with late payment after bankruptcy and/or housing event second offenders and will not approve them
Gustan Cho Associates are one of the very few national lenders with no overlays on VA mortgages.
VA Eligibility Guidelines And Requirements Per The VA
The VA Eligibility Guidelines And Requirements are listed on the Lender’s Handbook – VA Pamphlet 27-7.
- The automated underwriting system will determine the borrower’s eligibility through the AUS
- The loan officer will input the borrower’s mortgage application, credit report, and other pertinent information in the AUS
- Within seconds, the AUS will render its automated findings
- If borrowers meet all VA agency mortgage guidelines, the AUS will render an approve/eligible per automated underwriting system
- If the AUS cannot determine its eligibility, the findings will be a refer/eligible
- Refer/eligible automated findings may qualify for manual underwriting
- All borrowers need to have a valid Certificate of Eligibility (COE)
The loan officer can help borrowers in obtaining the COE through the Department of Veterans Affair’s eBenefit portal or applying through a mortgage company. VA approved lenders have access to the WebLGY. Only borrowers who can obtain the Certificate of Eligibility (COE) are eligible to qualify for VA mortgages.
Other VA Eligibility Guidelines
To qualify, borrowers need to be an eligible veteran or a current/former reserve officer and/or member of the National Guard. The need to the DD Form 214. Statement of service by a branch of the U.S. Armed Services.
National Guard members need the following:
- NGB Form 22
- Official paperwork report of separation and record of service for each period
- NGB Form 23 and retirement points accounting with proof of the character of service
Surviving Spouse Of Eligible Veterans:
Surviving spouse of eligible veterans in receipt of Dependency and Indemnity Compensation benefits require the following to proceed:
- VA Form 26-1817
- Veteran’s DD214 if available
- For the spouse of deceased veterans not receiving Dependency and Indemnity Compensation will need to submit a VA form 21P-534, DD214, marriage license, death certificate or DD Form 1300, and mail to the appropriate PMC States
For replacement paperwork, borrowers can go to the National Archives website.
Property Tax Exemption On Disabled Veterans
There are benefits for disabled veterans at both the local and federal levels.
- Depending on the veteran’s disability, most municipalities will exempt all and/or partial property taxes
- However, the property tax exemption on disabled vets does not come into effect until the veteran has closed on their home
- They need to apply for a property tax exemption
It normally takes between six months to 18 months to get this exemption into effect depending on the county and state.
Disability Income Mortgage Guidelines
Disabled veterans can use disability income by the Veterans Administration as a qualified income. Other tax-free income can also be used as qualified income such as disability retirement income, public assistance programs, child support payments, allowances by the VA, and workman compensation benefit income. In order for other income to be used, the likelihood of the income to continue for the next three years need to be promising. Tax-free disability income can be grossed up when mortgage underwriters are calculating debt to income ratios. For more information about qualifying for a VA mortgage with a direct lender with no overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at firstname.lastname@example.org.