VA loan approval may be easier than many people think. Understanding the VA requirements can help borrowers know what to expect during the VA home loan process.
The VA publishes a lender’s guide for companies that finance and finance VA loans. The manual contains four basic loan approval requirements that VA approved lenders use when reviewing loan applications. A veteran who understands the basic approval guidelines is no longer able to determine if he is likely to qualify for a VA mortgage loan. Here are four keys for VA loan approval:
Key # 1: Right to AV
The borrowers must, above all, be eligible for a VA home loan. This means that they must have met the service requirements and have enough “entitlement” to be considered for a VA loan. The law is a word used to designate the amount that the VA will guarantee for a particular veteran borrower. The “full” entitlement is usually sufficient for a $ 424,100 home loan (or more in high-cost countries).
Key 2 – Eligibility for Ownership
The lender’s manual states that the benefits of the VA home loan should be used primarily for owner-occupied properties. The VA lists VA-approved single-family homes, condos, townhomes and multi-family homes (up to four units per borrower) among the properties generally eligible for VA financing. (There may be additional qualification requirements.) The VA also guarantees the financing of prefabricated homes if they are attached to a permanent foundation; but not all lenders offer VA loans for modular homes.
Key 3 – Owner’s occupation
By law, VA borrowers must occupy the homes they finance. VA borrowers must verify that they will occupy their home within a reasonable time. For the most part, this means within 60 days of closing. Borrowers deployed outside their home can benefit from an extension of up to 12 months. The spouse is the only family member able to meet occupancy requirements in place of an eligible VA borrower. The VA Simplify Refinance Loans only require the borrower to have occupied the house in the past.
Key No. 4 – Income and Credit
VA eligible borrowers must be eligible for the loans they receive. Veterans (and co-borrowers, if united) must have a large and stable income and a satisfactory credit. Lenders have some leeway in deciding whether a borrower is a risk-free credit risk in the VA guidelines. VA-approved lenders can set their own minimum credit ratings. The VA recommends borrowers to have a maximum debt-to-income ratio of 41% and at least a residual income sufficient to cover usual living expenses. VA Streamline refinancing loans may not require credit and credit re-qualification.
Although other qualifying criteria may apply, depending on the loan program and the lender, when the four basic loan approval criteria are met, the candidate (s) generally qualify for their VA loan. The amount of the loan may vary depending on the rights and ability to pay of each eligible IB borrower.