Section 2.6

VA Loan Qualifications & Requirements

VA loans aren't available to just anyone. In addition to all of the VA loan service requirements covered in the last article, there are other qualifications and requirements you should be aware of.

While the specifics of these other requirements can vary from lender to lender, all of them will require both you—and the home—to meet certain qualifications.

These requirements are based on your available entitlement, your personal financial situation, the VA's occupancy rule, and whether or not the home itself meets all of the VA's property standards.

Qualifications for Available Entitlement

To summarize the above, an IRRRL cannot take place unless the borrower is noticeably benefitted by the refinance. This stipulation is a very important part of the VA loan program and is something that those of us at Low VA Rates are passionate about.

Your available entitlement is one of the fundamental factors in determining if you qualify for a VA loan. Essentially, your entitlement tells a lender how much money the VA is willing to guarantee on your loan if you default. If you don't have enough of it, you won't qualify.

However, the good news is that, since you're reading this article, you've probably never used your VA loan benefits before. If that's the case, then your full, unlimited entitlement should be available.

And when we say unlimited, we mean unlimited. As of January 1, 2020, VA loans for borrowers with their full entitlement are no longer subject to loan limits, which we'll discuss more fully in Section 2.10 of this series.

For now, all you need to know is that you can qualify for a VA loan, as long as you have enough entitlement from the VA to back it up. As a first-time VA loan borrower, you should be good to go.

Qualifications for Personal Finances

In order to give you a loan, the VA requires lenders to make sure it's something you can realistically afford. They do this by looking at and evaluating your personal finances using a variety of qualification criteria, such as your:

  • Total income
  • Debt-to-income ratio (DTI)
  • Residual income
  • Employment history
  • Credit history

You'll notice that the list doesn't include a minimum credit score. That's because the VA doesn't have a set requirement. However, lenders can choose to set their own minimum credit score requirement. When a lender does this, it's called an overlay.

Overlays for credit scores are fairly common on VA loans, with many lenders setting a minimum score requirement of around 640. However, overlays aren't a universal thing, which is why we encourage you to shop around, especially if your credit score is on the lower end.

Because the VA doesn't have a minimum credit score requirement, it is possible to find a lender who is willing to be more flexible and work with your situation.

The VA's Occupancy Requirement

All VA loans have some type of occupancy requirement.

If you are purchasing a home with a VA loan, this requirement states that you must intend to live in the home as your primary residence. In fact, in order to meet this requirement, you and/or your family are expected to move into the home within 60 days after the loan closes.

However, this timeline does have some exceptions. If you're on active duty, transferring duty stations, in the process of separating from service, or waiting on repairs to the home, the VA recognizes that you might need more time to get settled.

If your situation matches any of these examples, or you have other unusual circumstances that will affect your ability to occupy the home, you can request approval from the VA for delayed occupancy. In most situations, you will be required to provide an estimated occupancy date.

One thing to note is that your spouse can fulfill the occupancy requirement for you. So even if you can't personally move in within 60 days, whether because of overseas deployment or other reasons, but your spouse can, then you don't need to worry about getting VA approval for an exception.

But what about the other types of VA loans? What are their occupancy requirements?

Well, for cash-out refinances, the occupancy requirement is very similar to what it is for a purchase loan. Basically, you need to currently be occupying the home as your primary residence.

So, if you bought a home near your last duty station, but you've since moved to a new location after getting your PCS orders, then you probably won't be able to do a VA cash-out refinance since the home is no longer your primary residence.

As for the VA IRRRL, the occupancy requirement is much more flexible. You only need to confirm that the home being refinanced was, at one point, your primary residence. You do not need to be currently living there.

As one final note, the occupancy requirement does not include a set timeframe for how long you must live in the house. The VA doesn't set these minimums because they know how quickly things can change in the military.

The VA's Property Standards

In addition to the occupancy rule, the VA also has requirements for the property you want to buy. As we talked about in Section 2.2 of this series, some of these requirements include the type of home you wish to buy. These approved home types for VA loans include:

  • Single-family homes
  • Condos in a VA-approved complex
  • New construction homes
  • Manufactured homes with a fixed foundation
  • Multi-unit homes (up to four units)

In addition to the type of home you can buy with a VA loan, the property must also meet all of the VA's minimum property requirements (MPRs). We'll go into more detail on what these requirements are in Section 3.6 of this series when we cover everything you need to know about the VA appraisal.

Qualifying for a VA Loan Doesn't Have to Be Complicated

Even though VA loans do have requirements you'll need to meet in order to qualify, they tend to be much more flexible than the requirements for other loan types.

This flexibility, especially in regards to finances, makes it easier for a greater number of servicemembers and veterans—including you!— to achieve the American dream. Heck, they don't even require that you make a down payment!

Another benefit is that you aren't just out of luck if you don't qualify with one lender. If you get denied for a loan, you can always shop around for a different one whose qualifications you do meet.

Just make sure you include our team at Low VA Rates as one of your options. We pride ourselves on sticking as close as we can to the VA's guidelines, with as few overlays as possible, so that we can help more of our military get into the home they've always dreamed of.