What are the minimum requirements for a VA home loan?
The first requirement for a VA home loan is that you must be eligible for VA loan benefits. Most veterans, service members, National Guard, and Reservists qualify.
Other requirements include decent credit (usually 620 or above), stable income, and steady employment.
Luckily for veterans and service members, the VA home loan doesn’t require any down payment. So you don’t need a lot of money saved to qualify.
In this article (Skip to…)
- VA loan eligibility
- Down payment
- Credit score
- Income requirements
- Debt-to-income ratio
- VA loan limits
- Property requirements
- VA mortgage rates
VA loan eligibility requirements
Since VA mortgages are military loans, you might qualify if you’re a vet or active-duty service member. But serving in the Armed Forces (or being a surviving spouse of a service member) isn’t an automatic approval.
To get a VA loan, you must meet one of the following military service requirements:
- Served 90 consecutive days of active service during wartime
- Served 181 days of active service during peacetime
- Served more than six years with the National Guard or Reserves (or 90 days under Title 32 with at least 30 of those days being consecutive)
- You’re the surviving spouse of a service member who died in the line of duty or from a service-related disability
If you meet the qualifications, you can obtain a Certificate of Eligibility (COE) before applying, which is proof of your eligibility for VA financing.
Your COE also provides information about your VA entitlement.
If you haven’t used your VA home loan benefit before, you have ‘full entitlement’ and should be able to borrow without any down payment.
You can request your Certificate of Eligibility through the Department of Veterans Affairs’ eBenefits portal.
Or, your lender can access the database and obtain one on your behalf, usually in just a few minutes.
No down payment requirement
The VA loan program is unique because it doesn’t require a down payment, and borrowers don’t pay mortgage insurance.
Private mortgage insurance (PMI) is typically required when buying a home with less than 20% down. But VA borrowers escape this additional monthly fee.
However, this doesn’t mean that VA loans aren’t without costs.
VA closing costs
Even if you put zero down, you’re still responsible for upfront closing costs. These include lender fees and third-party mortgage-related expenses, like:
- Loan origination fee
- Title fees
- Appraisal fees
- Discount points
- Credit report fee
- Prepayment of property taxes and homeowners insurance
- Recording fees
- Real estate commissions
VA closing costs vary, but often range from 3-5% of the loan amount on smaller loans and 2-3% on larger loans.
For example, closing costs on a $350,000 VA mortgage might be around $7,000 to $10,500 (2-3%).
The VA funding fee
You’re also required to pay a one-time VA funding fee, which helps fund the VA program.
The funding fee amount depends on your loan type (home purchase or refinance), your down payment, and whether you’ve used a VA loan before.
For first-time home buyers with zero down payment, the funding fee is 2.3% of the loan amount ($2,300 for every $100,000 borrowed).
Note, you can roll the funding fee into your loan balance so you don’t have to pay it upfront out of pocket.
VA loan credit score requirements
The VA doesn’t set a minimum credit score requirement. This is different from a conventional loan or FHA loan, which require FICO scores of 620 and 580 respectively.
Understand, though, that lenders have their own minimum credit requirements.
Most VA lenders want to see a credit score of at least 620. Some will go as low as 580.
The lender will also look at your credit report to make sure you have a clean credit history.
For example, some lenders only allow one 30-day late payment within the past 12 months .
And if you have a bankruptcy or foreclosure in the past? You’ll have to wait two years after a Chapter 7 discharge to qualify for a VA loan, or 12 months from the filing date of a Chapter 13 bankruptcy. The waiting period after a foreclosure is two years.
Income needed for a VA loan
The VA home loan program doesn’t have minimum or maximum income limits. But your mortgage lender will review your personal income to determine how large of a monthly payment you can afford.
They’ll also review your employment record to make sure you have a steady job and income source.
You’ll need to provide supporting documentation when applying for a VA loan, such as:
- Tax returns and W-2s from the past two years
- Most recent paycheck stubs
- Recent statements for checking accounts, savings accounts, retirement accounts, and other investments
- Drivers license
If you’re using other income for qualifying purposes, such as spousal support or child support, you’ll also provide a copy of your divorce decree and other proof of support.
To use support payments for qualifying purposes, you must have received these payments for at least 12 months, and they must continue for at least 36 months after closing on the mortgage loan.
Keep in mind that lenders often require 24 months of consecutive employment, preferably with the same employer or in the same field.
If you’re self-employed, you must provide two years of business tax returns and a year-to-date Profit and Loss statement.
Debt-to-income ratio for a VA loan
Debt-to-income (DTI) ratio is the percent of your gross monthly income that goes toward monthly debt payments.
Lenders will review your income and calculate your DTI to determine your maximum loan amount.
With a VA loan, you’re typically allowed a max DTI of 41%.
That means your existing debts (credit card payments, car loans, student loans, etc.), plus your new mortgage payment, shouldn’t take up more than 41% of your monthly pre-tax income.
Keep in mind, this isn’t a hard or fast rule. It’s possible to qualify with a higher DTI — but only if you have higher residual income.
This is income left over after paying major expenses like your mortgage payment, installment loans, estimated utility costs, support payments, and revolving accounts. Lenders use income records and information on your credit report to gauge your residual income.
If you have a high amount of money left over, you might qualify for a higher loan amount.
VA loan limits
According to the U.S. Department of Veterans Affairs, there’s no limit or cap on how much you’re able to borrow with a VA loan.
As long as you have full entitlement — meaning you’ve never used a VA loan before — you can borrow as much as the lender will allow with no down payment.
Keep in mind, the amount you can afford it still limited by your income, DTI, and credit.
Your lender will only approve a large loan amount if it knows you can afford the monthly mortgage payments.
Credit rating has a huge impact on your mortgage rate. Borrowers with the highest scores typically qualify for the lowest rates, which increases purchasing power.
VA loans without full entitlement
If you don’t have full entitlement — maybe because you have an existing VA loan, or one you paid off but you still own the home — there are caps on the amount you can borrow without a down payment.
This limit varies and depends on the conforming loan limit for your area.
In 2022, it ranges from $ to $. Loan limits are higher in more expensive housing markets. If you need a higher loan amount without a down payment, one option is a VA jumbo loan.
VA loan property requirements
Be mindful, too, you can only use a VA loan to buy a primary residence. This is a home you plan to live in full time.
You cannot use a VA loan to purchase a vacation home or rental property. The only exception is when you buy a multi-unit home and live in one of the units.
You can, however, buy a home with a VA loan and rent it out at a later time.
Your new home must also meet the VA’s minimum property requirements, meaning it’s safe and sanitary.
The lender will order a VA appraisal, and your appraiser will inspect the property and determine its market value. As a general rule of thumb, you can’t borrow more than a home’s value.
VA loan mortgage rates
VA mortgage rates tend to be lower than interest rates for other loan types.
That’s because the VA guaranty makes these loans less risky for lenders. And they can charge borrowers lower interest rates as a result.
VA borrowers have different options for their interest rate. You can choose a:
- Fixed-rate mortgage — Your interest rate remains the same over the life of the loan, and so do your mortgage payments
- Adjustable-rate mortgage — Your rate is fixed for a certain number of years, and then resets every year thereafter. Your monthly payments will change if your rate resets
Fixed-rates are predictable, and typically the better option when you plan to live in a home long-term.
Critical factors that influence mortgage rates include your credit score and your debt-to-income ratio.
The higher your credit score and the less debt you have, the lower your risk of default. For this reason, paying your bills on time and keeping your debt low can help you qualify for a favorable mortgage rate.
Even so, rates vary from lender to lender. So make sure you request quotes from three or four VA-approved lenders to compare rates, terms, and fees.
Finding the best deal can save you thousands — even tens of thousands — over the life of your VA home loan.