Buying a home is an exciting—and often nerve-wracking—decision, especially for veterans who may have spent years traveling from place to place. VA home loans make it easier for those who have served to secure financing, but it doesn’t mean every veteran will be approved. Today, the loan experts at The Mortgage Minds Group will uncover twelve tips to help veterans qualify for a VA mortgage loan.
What Is a VA Home Loan
VA home loans are government-backed mortgages offered to US veterans and their families. Banks, credit unions, and other private lenders offer these loans to assist those who have served our country.
FAQ: How does a VA home loan work?
VA home loans are available in 15-year and 30-year fixed-rate terms and can be used to refinance up to 100% of a primary home’s value. There is often the option for no down payment without any monthly PMI.
FAQ: Can you have more than one VA loan?
The short answer is yes. Read more about second-tier entitlement here.
FAQ: Who qualifies for a VA home loan?
United States’ veterans, current active-duty military members, and qualifying surviving spouses are eligible to apply for a VA home loan, but not all applicants will receive approval. This blog post discusses ways to receive approval for a VA loan.
12 Tips to Qualify for a VA Home Loan
Understand the Loan
Consider VA Home Loan Occupancy Requirements
Prepare Documents & VA Home Loan Certificate of Eligibility (COE)
Get VA Home Loan Pre-Approval
Count the Cost
Improve Your Debt-to-Income Ratio
Work with the Right Agent
Choose a Home That Meets VA Minimum Property Requirements (MPRs)
Make a Down-Payment... Even Though It’s Not Required
Meet VA Home Loan Credit Requirements
Maintain Stable Income and Avoid Large Purchases
Investigate Supplemental Financial Resources
1. Understand the Loan
Before trying to qualify for a VA loan, it’s essential to familiarize yourself with the loan’s purposes, restrictions, and benefits. As with any type of mortgage loan, understanding this information prior to starting the application process can save you many hours of valuable time and place yourself in the best position to be approved.
However, you don’t have to do it alone—that’s what the experts are for, after all. So, consult with a qualified loan professional for advice and assistance in getting to know the details of your loan options.
Learn More: VA Home Loans—Mortgage Solutions for Veterans
2. Consider VA Home Loan Occupancy Requirements
As discussed, the purpose of VA home loans is to help veterans achieve homeownership. So, in line with that focus, VA home loan occupancy requirements state that a VA loan must be used to help finance a primary residence only. Different lenders will have more specific requirements, and properties must meet or exceed other standards of inspection and appraisal, but generally accept:
Single-family homes
Condos
Manufactured homes
Modular homes
Mobile homes
New-build homes
Multi-unit homes also can qualify for a VA loan, but you must occupy one of the units as your primary place of residence. Unfortunately, vacation homes, rentals, and investment properties do not qualify for a VA loan.
3. Prepare Docs & VA Home Loan Certificate of Eligibility (COE)
Buying a home involves a lot of paperwork, so preparing your financial documents ahead of time helps avoid unnecessary delays. While your loan officer can often gather many of these documents for you, it’s always a good idea to start organizing what you can early in the process.
For starters, attain a copy of your VA home loan certificate of eligibility, or COE, through the VA’s eBenefits portal. This document is issued by the US Department of Veteran’s Affairs and states that you have met or exceeded the military service requirements to qualify for the VA loan benefit.
At some point during the loan application process, you’ll also need to provide a valid ID, paystubs, tax returns, W-2s, bank statements, and explanations for certain large bank transactions, credit report pulls, and more. Organize what you can now to avoid stress later on.
4. Get VA Home Loan Pre-Approval
Preapproval is a valuable step in the home-buying process. For starters, it shows real estate agents (and their sellers) that you’re a serious buyer and have the means to make good on your offer. In today’s ultra-competitive real estate market, many sellers won’t even consider an offer from a potential buyer without mortgage preapproval.
Preapproval also gives you, the buyer, a clear figure of what you can afford. This saves you from the time wasted—and heartache caused by—falling in love with a property that’s simply out of budget.
5. Count the Cost & Save
One of the main perks of a VA loan is not needing to put much—or, often, any—money down. Plus, many standard closing costs are waived for veterans.
However, a down payment isn’t the only cost involved with buying a home, and some closing fees are non-negotiable. Prepare for these costs, which may include, but are not limited to, the following:
Credit report
Application fees
Loan origination fees
Hazard insurance
Property taxes
Appraisal fees
Inspection fees
6. Improve Your Debt-to-Income Ratio
Debt-to-income ratio, or DTI, is the percentage of debt payments you owe compared to the income you earn. Mortgage lenders use DTI to determine a buyer’s ability and likelihood to repay mortgage payments on time.
Each lender has varying standards when it comes to DTI, but they generally offer better loan terms for borrowers with a lower debt-to-income ratio. By paying off larger debts, you can improve your ratio and increase the chances of VA loan approval.
Expert Insight: Chris Birk (VP of Mortgage for Veterans United), says, “buyers whose DTI ratio exceeds 41% need to meet a higher threshold for residual income, which is a unique VA underwriting standard.”
7. Work with the Right Agent
Not all real estate agents are experienced with VA loans so they may not quite grasp the unique requirements, causing difficulty securing approval later. Choosing an agent that understands the differences between conventional and VA mortgages can make the process smoother and stress-free.
Start Here: Search online for a military-friendly real estate agent or ask your loan officer. Mortgage professionals work closely with those in the real estate industry and can point you to a local, experienced real estate agent for veterans.
8. Choose a Home That Meets VA Property Requirements (MPRs)
A mortgage loan generally requires an inspection and appraisal to check that the property is in safe condition, ensuring a wise investment for both the borrower and lender. To provide a stable, long-term home for veterans, homes with VA loans must meet the VA’s minimum property requirements, or MPRs.
To avoid additional stress, save effort, and maximize time when buying a home, review the MPR requirements before you start looking at properties. Tour homes that are in good condition, avoiding “fixer-uppers” for the best chances of getting approved for a VA loan.
Learn More: VA Loan Inspection Requirements (VA MPRs)
9. Make a Down-Payment... Even If It’s Not Required
You may be thinking, “Wait, what? A down-payment for a VA loan?” Even though a down-payment is not required to qualify for a VA mortgage loan, some veterans who have funds tucked away may choose to put some money down anyway. Why?
Making a down payment shaves cash off of the loan amount (the amount you borrow from the lender), reducing your monthly payment. This can save you hundreds of dollars a month and thousands of dollars in interest over the duration of your loan.
Check It Out: Free Mortgage Payment (and Interest) Calculator
10. Meet VA Home Loan Credit Requirements
While VA home loans do have more lenient credit requirements than conventional mortgages, the report still matters. Lenders will often provide better loan terms and lower rates to borrowers with better credit scores. This affects how much you will end up paying monthly and over the complete loan term.
It’s best to work toward improving your credit score as soon as possible—even before you decide to start looking for a home. Improve your credit utilization, strive to pay bills on time, and pay down any debts.
11. Maintain Stable Income & Avoid Large Purchases
This tip applies to mortgages of any type: as far as it is in your control, don’t make large financial changes during the home-buying and loan application periods. Even with VA loans, mortgage lenders check for income stability.
Any changes in income or employment may reduce eligibility or require starting the loan process over. This includes getting a new job (even if you’ve been hired for a better position elsewhere) and making a large purchase (like buying a vehicle.) Focus on one major life change at a time for the best odds of VA loan approval.
12. Investigate Supplemental Financial Resources
Due diligence pays off—literally. Researching additional financial grants and home-buying programs available in your area can put cash in your pocket and significantly reduce how much you owe on your new home.
Programs can vary by county and state, so speaking with an experienced loan officer is often your best bet. They can point you in the right direction and even help you apply for grants and programs to save you a lot of money. You can also do your own research online to find national programs or talk to veterans in your area who have bought homes recently.
Explore Loan Options with The Mortgage Minds Group
Working with a skilled lender can make the home buying experience seamless and stress-free. Here at The Mortgage Minds Group, we get to know you and your needs before recommending the best loan option available.
You’ve served our country—now, let us serve you. For help financing the home of your dreams, reach out to us today to chat.
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