The Department of Veterans Affairs or VA is a federal agency that provides veterans and their dependents with health care and benefit programs, along with other needs. The VA website, says their mission is, “To fulfill President Lincoln’s promise ‘To care for him who shall have borne the battle, and for his widow, and his orphan’ by serving and honoring the men and women who are America’s veterans.” Their vision is, “To provide veterans the world-class benefits and services they have earned…”
Besides health care services, the VA has a benefit unit. The Veterans Benefits Administration, or VBA provides services like education and vocational training aids, pensions, and life insurance for former members of the US armed forces and their families. Another benefit that the VBA provides are VA home loans.
What is a VA Home Loan?
The goal of the VA home loan is to help veterans, service members, and some spouses become homeowners. By promising a part of the loan the VA helps let qualifying people get the home loan they need. The home loan is still given by a bank or mortgage company, but with better terms.
There are four different types of VA home loans, depending on what your needs are and what you need and are able to get.
- Purchase Loan and Cash-Out Refinance Loan – A Purchase Loan lets you purchase a home at a fair interest rate without needing a down payment or private mortgage insurance. The Cash-Out Refinance benefit gives you the choice of taking cash out of your home equity so that you can pay off debt, make home improvements or even pay for school.
- Interest Rate Reduction Refinance Loan (IRRRL) – If you already have a VA loan the IRRRL lets you to refinance it to try and get a better interest rate. The IRRRL is also called a Streamline Refinance Loan.
- Native American Direct Loan (NADL) – This loan helps qualifying Native American Veterans finance the buying, building, or making home improvements of homes that are on Federal Trust Land. This loan type can also help reduce the interest rate on an existing VA loan.
- Adapted Housing Grants – These grants let veterans that have permanent and total service related disabilities buy or build a modified home to adjust for their disability. These grants also let a qualified veteran to renovate their existing home to accommodate for their disability.
- There are other resources available to veterans. Some states have property tax or other aids, but these are state by state aids and are not controlled by the VA.
- Qualifications for VA Home Loans – Veterans, active duty service members, National Guard members and reservists could all possibly get for a VA home loan. The Department of Veterans Affairs also lets some spouses to get for a VA home loan if their spouse died while on active duty or from a service related disability.
Eligibility is ultimately determined by the VA itself, however, there are basic conditions that can give you a good idea if you can get a VA home loan. According to Veterans United these conditions are:
- Serve for 90 consecutive days of active service during wartime, OR
- Serve 181 days of active service during peacetime, OR
- Having more than six years in the Reserves or National Guard, OR
- Being the spouse of a service member who died in the line of duty or because of a service connected disability.
If you don’t meet these conditions it does not mean that you still won’t be able to get a VA home loan. You can review the detailed list of conditions located on the Department of Veterans Affairs website or you can contact a VA home loan specialist that can help you figure out if you qualify.
VA Home Loan Requirements
Once it is found that you qualify then it is time to find out if you can meet the requirements of a VA home loan. The Department of Veterans Affairs and your home loan lender both have their own requirements for a VA home loan. These include, but are not limited to:
- The home loan must be for a qualified purpose.
- The person applying must have decent credit. Though the VA does not require a certain credit score most banks and mortgage companies do.
- The person applying for the loan also must have a low debt to income ratio. This is the number of monthly debts and payments compared to monthly income. The VA prefers a 41% or lower debt to income ratio, but lenders often permit a higher percentage.
- The applicant must move into the home or plan to move in within a certain time of closing on the loan.
- The person who gets the loan must be stable enough that they can pay the home loan, cover costs tied to owning a home, cover other expenses and still have enough money left to support their family. This left-over money is also called residual income. Residual income helps make sure that the person who takes out the loan will still be able to support their family’s basic needs. The residual income is also why fewer VA home loans go into foreclosure.
- The VA also must do a review of the property. This review is different than a normal home inspection which is usually more detailed. The VA review looks at the condition of the property compared to the market value of other similar homes. The property also must meet the VA’s Minimum Property Requirements, to make sure that the home is safe and in good condition for those moving in.
VA Home Loan Disqualifications
After going through the qualifications and requirements for a VA home loan there are still a few things that will can disqualify a veteran or spouse. If a veteran got a dishonorable discharge, they cannot get a VA home loan. The applicant must also plan on living in the home the loan is for. Also, if the spouse has remarried then they are also barred. It is important to know anything that may disqualify you from getting a VA home loan. Talk to a specialist if you have any questions or are unsure.
Not all banks and mortgage companies are certified to provide VA home loans. The VA has its own set of requirements and an application process for lenders. This helps ensure that applicants are not taken advantage of by a predatory lender. Any bank or mortgage company that has been approved by the VA will be able to assist you in all steps of the VA home loan process.