VA home loans are one of the most popular benefits available to veterans and active-duty service members. VA loans offer several key advantages, including no down payment, no private mortgage insurance, and flexible credit requirements. VA loans are available to eligible veterans, active-duty service members, reservists, national guard members, and certain surviving spouses.
But to qualify for a VA loan, you must meet the following eligibility requirements.
You Must Have VA Entitlement
VA entitlement is the key to VA loan eligibility. It's a guarantee from the Department of Veterans Affairs that protects lenders against loss if a borrower defaults on their VA loan.
VA entitlement comes in two forms:
- Basic entitlement is available to all eligible veterans. It's equal to 25% of the VA loan limit, which varies by county. For example, if you're buying a home in a high-cost area with a VA loan limit of $700,000, your basic VA entitlement would be $175,000.
- Bonus entitlement is available to veterans who have previously used their VA loan benefits. It offers an additional amount above the VA loan limit on top of the basic entitlement. So in the same example above, a veteran with bonus entitlement would have a lot more than $175,000 in VA loan guarantees.
To check your VA entitlement, you can request a Certificate of Eligibility from the VA. The COE will list your entitlement amount and other important information about your eligibility for a VA loan.
If you don't have VA entitlement, you may still be eligible for a VA loan if you qualify for special "entitlement restored" status. This can happen if you:
- Pay off your VA loan in full
- Sell your home and pay off your VA loan
- Refinance your VA loan into a non-VA loan
If you qualify for entitlement restored status, you'll be eligible for the same VA loan benefits as any other veteran.
You Need to Have a Good Credit History
A strong credit score is important for VA loan eligibility. Lenders will pull your credit report as part of the VA loan process, and they'll use your credit score to help determine whether you qualify for a VA loan and what interest rate you'll pay.
Generally, VA lenders are looking for a minimum credit score of at least 580. But if your credit score is below that level, you may still be eligible for a VA loan if you have strong compensating factors, such as a steady income or a low debt-to-income ratio.
If you're unsure what your credit score is, you can check it for free on some accredited websites. But remember that your score may differ from the one VA lenders use, so it's always best to check with your lender for their specific credit score requirements.
Once you know your credit score, take some time to improve it before you apply for a VA loan. A higher credit score will help you get a better interest rate, which could make the difference between getting approved or being denied a VA loan.
To learn more about VA home loans, contact a loan professional in your area.