Requirements for VA Loans

Understanding VA Loan Eligibility and Terms

Smiling female soldier talks with bank loan officer
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For homebuyers, a VA loan offers many attractive features: low interest rates, no down payment requirements, and no private mortgage insurance (PMI) payments. You'll need to meet the VA loan requirements and understand the VA loan-specific terms so you can qualify—and make sure you get the best deal.

Key Takeaways

  • You'll need to meet certain service requirements for VA loans to qualify for a loan guarantee. This enables active service members, veterans, and eligible spouses to access a home loan with no money down and no PMI.
  • Your Certificate of Eligibility (COE) tells your lender that you're eligible for a VA loan.
  • VA loans require an upfront one-time funding fee of up to 3.6% of the purchase price.

What Are VA Loans?

VA loans are consumer-friendly mortgages designed for present and past military members. They're guaranteed by the Department of Veterans Affairs (VA), which means that if you default on the loan, the VA will pay your lender a portion of the home value. This makes VA loans less risky for lenders.

VA loans don't require a down payment, although you can make one if you want to save money on interest and possible fees, which are based on your loan amount. With conventional loans, you'll pay PMI if you don't put at least 20% down. With VA loans, you won't have to pay PMI at all, even if you opt for a no-down-payment mortgage.

Requirements for VA Home Loan Eligibility

To get a VA loan, you'll need to meet the following criteria.

Service Requirements

The crux of the VA loan program is that it's available to people who have served in the military. To qualify, you'll need to meet certain time-in-service requirements depending on your enlistment date and branch of service.

If you're an active-duty service member, you'll be eligible for a VA loan after 90 days of service. For veterans, it gets a bit more complicated, but most are eligible if they've served at least two years.

Debt-to-Income Ratio

VA loan requirements limit your debt-to-income (DTI) ratio to 41%. You may be eligible if your DTI is higher than that in certain cases, but your lender will have to justify to the VA why they approved the loan.

Credit Requirements

You may have heard that there are no credit score requirements for VA loans, and while that's technically true, it's not the case in practice. Lenders do set their own bars for what credit score you'll need; most look for a score of at least 620.

You are ineligible for a VA loan if you've done a short sale, foreclosed on a home, or declared Chapter 7 bankruptcy in the past year (two years for Chapter 13 bankruptcy). With a conventional loan, however, you might have to wait up to seven years before you're eligible for a mortgage again after declaring bankruptcy.

Income Requirements

Similarly, there are no set minimum income requirements for VA loans. Even so, lenders will want to check that you have enough income to make payments on your loan. That requirement may vary by lender and the size of the loan you're looking to get.

Occupancy Requirement

To qualify for a VA loan, you or your spouse will need to live full time in the house. A dependent child can also satisfy the occupancy requirements. In other words, VA loans are only for primary residences. You can't use a VA loan to purchase an investment property, a vacation house, or anything else that you and/or your spouse or child won't be living in full time.

VA Appraisal

When you find the house you're looking for and apply for a VA loan, your lender will send out a VA-approved appraiser to determine the home's actual value. That's the maximum amount you'll be able to borrow, regardless of what the purchase price turns out to be.

VA Loan Terms

If you're shopping for a VA loan, you'll quickly notice some terms that aren't used with other types of mortgages. It's important to understand these terms so you know what to expect throughout the process.

Certificate of Eligibility (COE)

The COE tells lenders whether you're eligible for a VA loan, and if so, how much you can borrow without making a down payment. The VA is responsible for producing COEs, allowing you to apply for yours through its online eBenefits portal. Your lender can also look up your eligibility for you if you provide them with your DD214 (if you're a veteran) or a statement of service (if you're active duty).

Entitlement

Your VA loan entitlement is how much the VA will reimburse the lender if you default on the loan. You have two types of entitlement: basic entitlement and bonus entitlement​​ (also known as Tier 2 or additional entitlement). Together, these numbers determine how much of your loan the VA will guarantee, as well as whether you'll need to make a down payment—and if so, how much.

Your COE will list your basic entitlement, which is set at $36,000 if you have "full" entitlement.

If any of the following are true, you have full entitlement. You’ve:

  • Never had a VA loan
  • Paid off a previous VA loan and sold the house, thus restoring your full entitlement
  • Had a VA loan and then foreclosed or had a compromise claim (also called a short sale) but repaid the loan in full

Your basic entitlement can be used for a loan that’s under $144,000. For loans over that amount, your bonus entitlement applies. The VA will fund up to 25% of the conforming loan limits set by your county using your bonus entitlement.

If you’ve already used up part of your entitlement with one loan, you may still be able to use the remaining entitlement to purchase a second property. But you may need to make a down payment in this case. That’s because most lenders require that at least 25% of the loan amount is covered by your entitlement, a down payment, or both.

VA Loan Funding Fee

VA loans don’t require PMI, but there is nonetheless a different upfront cost associated with these loans: the VA loan funding fee. This is an administrative fee unique to VA loans. It is a one-time charge that can either be paid upfront at closing or financed into your loan.

The exact fee depends on whether you've used a VA loan before and how much of a down payment you're making. If it's your first VA loan and you're not putting any money down, the fee is 2.3%. That increases to a maximum of 3.6% if you've used a VA loan before. However, if you put at least 10% down, the fee is only 1.4%, regardless of how many times you've used your VA loan.

Frequently Asked Questions (FAQs)

What are the requirements for a VA loan?

You'll need to have served for a certain period of time, depending on the branch service and when you enlisted. For active-duty military, that generally means at least three months of service. For most veterans, it is at least 24 months of service with an honorable discharge. You'll also need to have a certificate of eligibility (COE) and agree to use the home as your primary residence.

What is the minimum credit score for a VA loan?

There is no official minimum credit score to be eligible for a VA loan. However, each lender sets a minimum credit score and income requirement for their own purposes. In June 2021, the average VA loan borrower had a credit score of 722, which is considered a “good” score.

Can anyone get a VA loan?

No. VA loans are meant for active-duty service members and veterans who meet certain VA and lender requirements and who will live in the home they plan to purchase with the loan. Many service members will qualify, but not all. Specifically, those who receive an other-than-honorable, bad-conduct, or dishonorable discharge are disqualified. 

The following people may also be eligible for a Certificate of Eligibility for a VA loan: public health officers, cadets in the U.S. Military, Air Force, or Coast Guard Academy; midshipmen at the U.S. Naval Academy; officers of the National Oceanic & Atmospheric Administration; or merchant seamen during World War II.

Is it hard to get a VA loan?

If you can meet the requirements for VA loans, it's usually not difficult to get a VA loan. However, if your credit score is less than 620, or if you have a debt-to-income ratio of more than 41%, it may be more challenging since most lenders set each of these as requirements.