Military members past and present who have served 90 consecutive days of active service during wartime or 181 days of active service during peacetime are eligible for VA loans. More than six years of service in the National Guard or Reserves also makes you eligible. Applications can be submitted through a VA-approved lender, online through the VA’s eBenefits portal or by mail with VA form 26-1880. Applicants will also need a VA Certificate of Eligibility. You can contact the VA directly, or you can fill out the Certificate of Eligibility (VA form 26-1880).
While there is no income threshold required to apply for VA loans, applicants are expected to have a stable and reliable income. It should cover all monthly expenses, including the newly acquired mortgage payment, once it has been approved. It is very important that approved applicants have money left over after monthly bills and expenses are paid. This leftover income typically covers food and transportation costs. Borrowers need to have a financial cushion in the event that an emergency occurs while the mortgage payments are being made.
Remaining residual income is why the VA maintains one of the lowest foreclosure rates of all the major mortgage lending options. VA loans will not be approved unless the applicant can prove they maintain a high financial responsibility. Credit scores from the three leading agencies are checked. Before you even apply for VA loans, it is very important that you check your credit report for errors. Even the smallest error on your credit report can mean the difference between a quick approval and a closer examination of your financial history.
The VA will carefully examine your debt-to-income ratio. All of your collective debt and credit requirements from private lenders will be considered. If it is determined that your debt is too much for your income to handle, your loan request will likely be denied. Even if you are paying your bills on time, it is still possible to be turned down for the loan. Yes, you may have a steady income, but the VA needs to be sure that you will come through and pay off your loan agreement. If you have an outstanding car or student loan while applying for the VA loan, you are presenting yourself at a higher risk. The VA needs to feel like you will be able to pay all your debts, including your loan payment.
Active military or veterans who have been dishonorably discharged are not eligible for VA loans. Loan processing can take 30 to 45 days, depending on an applicant’s credit or lending history. Veterans are the reason we enjoy the freedoms and liberties we have today. They fought for us and put their lives on the line so that we could continue to live comfortably. Veterans should be extended that same courtesy. Many veterans may have not had an easy time in their post-war and post-military time. This type of loan allows them to take 100 percent financing for the home they are going to buy without having to worry about making a hefty down payment.
Loans from the VA are good for the housing market as the VA has the lowest rate of foreclosure. Borrowers are required to have a financial cushion or emergency fund in place. This is better than any government-guaranteed loan program can offer. Some home loans and mortgage lenders are backed by the government, but they do not guarantee that the borrowers have to have a cushion or emergency fund in place. This could be one of the reasons that the number of homes entering foreclosure has increased in recent years. You may also want to keep in mind that foreclosed homes sometimes end up selling at a discounted price or are even put up on the auction block. Banks want to get their money’s worth. The longer a foreclosed home stays on the market, the more money is being kept from their deep pockets. Before you make an offer on a foreclosed home, you will want to check with your lending professional to make sure there is not anything in a loan agreement that could stop a foreclosed deal from going through.
