The VA loan program offers a benefit to qualifying service members who have served the required minimum time in uniform. But unlike other types of VA benefits, getting a VA home loan isn’t a matter of just meeting that minimum required time and signing up. A borrower must also financially qualify for this home loan in the same way one would qualify for any other line of credit.
Establishing the borrower’s VA loan eligibility is the first step towards loan approval, but being declared eligible doesn’t equal loan approval itself.
Establishing your VA loan eligibility can be a simple matter of working with a lender, submitting the required documents showing your military standing and current service commitment. The lender can submit the paperwork on your behalf, but borrowers can also do it themselves by applying online at http://www.ebenefits.va.gov/. You will need to provide either proof of discharge or proof of current service as described on the VA official site (www.va.gov).
VA loan eligibility means establishing your “entitlement” for the VA loan. When you have never used your VA loan benefits before, you have 100% entitlement once your eligibility is established. If you have used your VA loan benefits before, you may not have used all your entitlement, so you may either apply using your remaining entitlement or apply to have the original entitlement restored.
Restoring VA loan entitlement happens by filling out paperwork when you pay off the original loan or sell the home. When refinancing, your original loan is paid off and a new loan takes its’ place, so entitlement is restored at that time.
Once your VA home loan entitlement is established and your lender receives a VA Certificate of Eligibility (COE), then you can proceed with the loan application itself.
Borrowers must financially qualify for a VA mortgage. Your lender will review your FICO scores, the repayment history of your financial commitments, and your debt-to-income ratio. Borrowers should take at least 12 months to prepare for this application process, because the lender will be especially interested in your payment history over the last year. Do you have late payments on your record? Have you experienced bankruptcy, foreclosure, or other credit report “negatives”?
If so, having a record of on-time payments for ALL financial obligations in the last 12 months will go a long way towards helping the lender approve your loan. But the “12 month rule” applies to ALL borrowers, not just those with financial hardships in the past. It’s strongly advised to come to the loan application process with 12 months of on-time payments for all your financial commitments.
Getting to loan approval after establishing your VA loan eligibility may take some work, but with a bit of planning you can apply with confidence. Establishing eligibility is the first step. Speak with a loan officer to learn more or review the Home Loan Benefits section of the VA official site for more information on how to apply for your VA COE.