Whether you are a First Time Home Buyer, a current home owner looking to buy your next home or an experienced homeowner looking to size down, today’s market conditions can seem confusing and overwhelming.
So what are the basics of qualifying for a VA Mortgage?
First, you must fall under the eligibility requirements (list not exhaustive but includes some of the most common categories)
Active Duty Member………………………..90 Days (181 during peacetime)
Former Active Duty (1990-present)…..2 Years
Reserves/Guard……………………………..6 years in Selected Reserves
Unmarried Surviving Spouses…………..No Time Requirement- veteran must have died on active duty or from a service-connected disability
POW/MIA Spouses………………………….The spouse of an active duty member who is listed as missing in action(MIA) or a prisoner of war (POW) for at least 90 days
Next is meeting the credit worthiness requirements for VA Loans
- Minimum credit score of 620
- Bankruptcy (Chapter 7)- Generally the requirement is 2 years from discharge date. It is possible to qualify for a mortgage in less than 2 years if the bankruptcy was filed due to circumstances outside of your control (example: unemployment, medical bills not covered by insurance. Divorce is NOT considered to be outside of an applicant’s control
- Bankruptcy (Chapter 13)- If all payments have been made and the bankruptcy has been discharged, the applicant is eligible to apply for a mortgage. If the bankruptcy has NOT been discharged, the applicant must show proof of making at least 12 payments and must obtain approval from the court to apply for the loan
- Foreclosure/Short Sale- Same as Chapter 7 Bankruptcy. If foreclosure was on a VA loan, you might not have full entitlement which would then require a down payment
- A minimum 2 year history must be verified. If active duty, less time is acceptable as long as the minimum service requirement for eligibility has been met. A Verification of Employment will be obtained by your lender for each employer listed
- Employment must be verified as being in the same industry/field. If you recently graduated from school and have a job in which you don’t have a full 2 years experience, verification of schooling could satisfy this requirement
- Retirement, Disability, alimony and child support income does not require a 2 year history but verification that it will continue for at least 3 years is required in order for it to be included
- Income must be shown to be stable and likely to continue. When attempting to use overtime, bonuses, part-time employment etc, a 24 month history is generally required. You will need to provide current pay stubs, 2 years of W-2’s and 2 years of Federal Tax returns
- You must have sufficient cash to cover any closing costs or fees not paid by the seller
- VA does not require additional cash to cover a certain number or mortgage payments or unplanned expenses (cash reserves), however, your ability to accumulate liquid assets and the amount of assets currently available is taken into consideration int he overall credit worthiness analysis.
- You will need to provide 2 months of current bank statements to verify your current assets.
Debt to Income Ratio requirements
The rule of thumb is this : All monthly obligations (car payments, credit cards, student loans, alimony, child support etc) and new estimated mortgage payment should not exceed 50% of the usable, gross monthly income. However, higher percentages can be approved.
Excellent credit history, good employment history, good cash reserves, little to no increase in housing payment are compensating factors that will be considering when allowing higher debt to income ratios.
Don’t forget that service personnel that served at least 90 days outside of the U.S. are still eligible to receive a Federal Tax Credit if a contract for the purchase of a home is signed by April 30th.
And those are the basics of a VA loan