This BLOG On VA Home Loan Guidelines And Requirements On Home Purchase Was PUBLISHED On June 11th, 2020
VA loans are the best residential loans in the U.S.
- There is no other loan program that is better than VA Home Loans
- The Department of Veterans Affairs (VA) is the government entity that insures VA Loans
- VA offers the lowest interest rates, no mortgage insurance required, and 100% financing
- Lenders can offer VA Loans to eligible borrowers who meet VA Home Loan Guidelines at low rates with 100% financing with no mortgage insurance due to VA’s Guaranty
In this article, we will discuss and cover VA Home Loan Guidelines And Requirements For Borrowers On Home Purchase.
VA Home Loan Guidelines On Credit Scores
The Department of Veterans Affairs does not have a minimum credit score requirement.
- Can have credit scores as low as 500 with some lenders
- I’ve seen some instances with no credit scores but they are far and few between
- However the better the score the easier it is to obtain financing
- We can offer VA Loans with no overlays
- As long as borrowers can get an approve/eligible per automated underwriting system, we are set to go
- We have no other overlays on VA Loans and just follow VA Home Loan Guidelines
To get an approve/eligible per automated underwriting system, a 580 credit score is highly recommended with timely payments in the past 12 months.
VA Home Loans Guidelines And How Does Process Work?
Because VA offers 100% financing for veterans with poor credit or limited resource’s it is the cheapest type of mortgage program available.
What exactly are VA Loans?
- The Veterans Administration guarantees the loans and does not act as the lender
- The Veteran has to have a VA certificate of eligibility to qualify
- Better know as a DD214 VA Service Requirements
- Activity-duty service
- 90-days consecutive days of active service
- 6 plus years in the Reserves or National Guard
- National Guard and reserves
- 181 days of active duty service during peacetime
Other Factors Where Borrowers Meet VA Home Loan Guidelines
There are circumstances if they were discharged due to hardship, reduction in force, discharged due to
government convenience, some medical conditions or service-related disability where borrowers can meet VA Home Loan Guidelines:
- Dishonorably discharged Veterans are ineligible for this loan
VA Mortgage Loan Benefits:
- 100% financing
- Lower interest rates
- Higher DTI ratios
- Lower closing costs
- No mortgage insurance
- Easier to qualify for
- No credit score requirements
- No debt to income ratio caps
Gustan Cho Associates Mortgage Group has no overlays on VA Home Loans.
VA Loan Limits
Depending on the state and the county VA loan limit increased to $453,100 in 2018 from $424,100 except in 220 high cost counties where they are higher. This represents a 6.8% increase this year.
For comparison, there are 3,234 counties and county-equivalents
VA Debt-To-Income Ratios
VA has set no loan limits on debt to income ratios but the lenders have their own DTI limits often called lender overlays so finding the right lender with no overlays is key. Typically, lenders have a 41% limit but I have seen Back end ratios as high as 65% qualify for the higher DTI with strong compensating factors. It depends on how the Automated Underwriting System reads the credit and income profile of borrowers. Compensating Factors are key.
Here are examples of compensating factors:
- Large amounts of cash
- Minimal increase in current housing payment (low payment shock)
- High net worth
- Ability to make a down payment
- High credit score
- High net worth
2020 VA Funding Fee Chart for 2018
VA Chart: Purchase and Construction Loans
VA Funding fee Chart: Rate/Term or Cash/Out
VA Funding Fee Chart: IRRRL’S
VA Cash-Out Refinance
The VA’s Cash out allows veterans to take cash out of their property up to 100% of the appraised value of
the property. No other loan will allow this to pay off debt, home improvements, or schooling. As home
values continue to rise this may be a great tool for veterans to take advantage of with refinancing.
VA IRRL Streamline
If you currently have a VA loan they allow you to do a refinance to lower your rate with very little
documents. All you need is a job, a credit score with no lates on the mortgage for the last 12 months, and no appraisal.
If you have any questions about VA loans I’ve been involved in finance for 33 years and take pride in
helping Veterans that have served our country.
June 11, 2020 - 4 min read