VA Loans: Eligibility Guidelines and Application Tips

To get a conventional mortgage, you need to meet strict lending requirements, which can make it difficult for some applicants to qualify for financing. If you're a veteran or currently serve in the military, you may qualify for a government-backed VA loan, making it easier to access mortgage funds. This guide provides an overview of VA loans and explains how to qualify.

What Is a VA Loan?

VA loans are mortgages issued by private lenders and guaranteed by the federal government. If a borrower defaults on a VA loan, the government steps in and buys the debt, ensuring the lender gets paid. As a result, the requirements for a VA loan are often less stringent than the requirements for a conventional loan.

How Much Can You Borrow With a VA Loan?

There's no limit on the amount of money you can borrow with a VA loan; however, the VA limits the amount it will guarantee for borrowers with remaining entitlement. You may have remaining entitlement if any of the following apply to your situation:

• You're still repaying a VA loan.
• You refinanced a VA loan into another type of loan and still live in the same home.
• You repaid a VA home loan and still live in the same home.
• You had a previous VA loan that went into foreclosure and still haven't repaid it.
• You did a short sale or compromise claim on a previous VA loan and still haven't repaid it.
• You had a previous VA loan, signed over the title to the lender to avoid foreclosure and still haven't repaid the loan funds.

If you have remaining entitlement, the amount of money the VA will guarantee is limited to 25% of the loan limit for your county, less any entitlement you've already used. Loan limits vary based on the cost of living in each county, so it's possible to have a large gap between the limits for two counties in the same state. For example, Modoc County, California, has a limit of $647,200 in 2022, while San Francisco County has a limit of $970,800. If you have full entitlement, then there's no limit to the amount the VA will guarantee for a home loan.

What Is the VA Loan Certificate of Eligibility?

The first step to qualifying for a VA loan is to obtain a certificate of eligibility. This document is used to show lenders that you meet the requirements to obtain a loan guaranteed by the VA. To obtain a COE, log in to your eBenefits account and submit a request. Be prepared to provide the following to prove your service:

• Veterans: You'll need a copy of your DD214 (separation papers).
• Active-duty service members: You need to obtain a statement of service from your commander. This statement must include your full name, date of birth, Social Security number, the date you began your service and the name of the commander completing the statement.
• Current/former activated Reserve members: You'll need to provide a copy of your DD214.
• Current/former activated National Guard members: You'll need a copy of your DD214. If you had at least 90 days of active-duty service, you'll also need a copy of a document showing your activation date. Accepted documents include a DD20 with orders, an annual point statement or a DD214 showing activation under 32 USC §316, §502, §503, §504 or §505.
• Current members of the Reserve or National Guard who've never been activated: You'll need a statement of service from your commander. It should include your full name, SSN, date of birth, the name of your commander and the date you began your service.
• Discharged members of the National Guard who've never been activated: You'll need proof of honorable service and a copy of your most recent annual points statement.
• Discharged members of the Reserve who've never been activated: You'll need proof of character of service, a copy of NGB Form 23 and a copy of NGB Form 22 for each period of National Guard service.
• Surviving spouses of veterans with service-connected disabilities and veterans who died while on active duty: You'll need a copy of the veteran's DD214. If you receive Dependency & Indemnity Compensation benefits, you'll also need to send the VA a Request for Determination of Loan Guaranty Eligibility—Unmarried Surviving Spouses (Form 26-1817). If you're not receiving DIC benefits, you'll need to provide a copy of the veteran's death certificate, a copy of your marriage license and a completed Application for DIC, Death Pension and/or Accrued Benefits (Form 21P-534EZ).

What Are the Requirements to Get a VA Loan?

Once you have a certificate of eligibility, you'll need to meet additional requirements to obtain a loan through the VA. Some of these requirements are specific to the lender, while others apply to all VA loans.

• Credit score: Each lender sets its own minimum credit score. If you have a high score, you're more likely to qualify for a loan with favorable terms.
• Property type: Some lenders won't issue loans for condos or manufactured homes, while others are willing to finance multiple property types. Once you buy a property with a VA loan, you must make it your primary residence within 60 days of closing. You can't use VA loan funds to buy an investment property, but you can use them to buy a multifamily residence as long as you live in one of the units. If you buy a multifamily property, it can only accommodate a maximum of four families.
• Down payment: One of the advantages of VA loans is that the VA doesn't require a down payment. Your lender may require you to have a high credit score to qualify for a no-down-payment loan, however.
• Income: Each lender has different debt-to-income ratio requirements. Your DTI compares your monthly debt payments with your monthly income. If your DTI is high, you may not qualify for a loan with some lenders.
• Reserve funds: Your lender may require you to prove that you have funds in the bank to make your mortgage payments once the loan closes. 

Advantages of VA Loans

VA loans have several advantages when compared to conventional loans, including no down payment requirement, lower-than-usual interest rates, no private mortgage insurance and less stringent borrowing requirements. It's also possible to refinance your VA loan, even if you don't have any equity in the home, which may help you take advantage of lower interest rates.

Veterans also have access to additional benefits from the VA, such as potential eligibility for grants that can be used to adapt a home to accommodate a veteran's service-connected disability. Disabled veterans are also exempt from the funding fees on VA loans.

Steps to Applying for a VA loan

Once you secure a certificate of eligibility, follow these steps to qualify for a VA loan:

1. Get preapproved by a lender.
2. Find a house that meets your needs.
3. Put in an offer on the home.
4. Go through the underwriting process.
5. Close on your VA loan.