VA Home Loan Mortgage Guaranty Information
Veterans Administration Eligibility, Qualifications and Benefits
Since 1944 the Veterans Administration (VA) has helped millions of Americans purchase homes. The VA guarantees a portion of the home loans for qualified veterans to private lending institutions. This minimizes the risk to the lending institutions, making the home loan more accessible to veterans. Many conventional mortgages require a large down payment to minimize the risk of default. Since the VA home loan minimizes the risk, veterans can often get in to a home mortgage with no money down.
VA Home Loan Eligibility
For a veteran to be eligible for a VA home loan, there are certain guidelines and requirements that must be meet.
- The veteran received an honorable discharge
- A minimum of 181 days continuous active service during time of peace or
- A minimum of 90 days of service during wartime
- If service started after September 7, 1980 there is a two-year requirement (October 16, 1981 for officers)
- For reserve veterans there is a 6-year service requirement
- The veteran must be the occupant of the home
VA Home Loan Qualification – Debt to Income Ratio
The Veterans Administration wants to make sure that the vet can afford the monthly mortgage payments. It would be a disservice to the veteran, as well as the lending institution, if the monthly payments can’t be made and the mortgage goes into default. To ensure that the vet doesn’t struggle to make the monthly payments, the VA has established a 41% debt to income ratio as a qualification.
The debt to income ratio is formulated by dividing total income into total debt. Total income is actually total gross income before taxes. If a spouse is listed as a co-borrower, the spouse’s income can be combined with the veteran’s income. The debt that’s used for the debt to income ratio is:
- Monthly mortgage payment
- Property taxes and homeowner insurance
- Revolving loans such as credit cards
- Installment loans such as car loans
- Personal loans
As example let’s assume that the total monthly gross income for a veteran and their spouse is $6,000 a month. The home they want to purchase will have monthly payments totaling $1,500, including taxes and home insurance. Their other combined debt on credit cards, car loans and personal loans equals $1,600 a month. Their debt to income ratio would be rounded to 52%.
Debt $3,100 ($1,500 + $1,600) / Income $6,000 = Debt Income Ratio of 52%
In this example, since the debt to income ratio is above 41%, the veteran and their spouse would qualify for the VA home loan.
There are also limits to the maximum loan amounts that vary by counties. Generally those counties that have higher average home values have higher VA home loan limits. There are also closing costs associated with a Veterans Administration loan. The biggest advantage to the veteran is they can get a home loan with a zero down payment.
Sources:
homeloans.va.gov
valoans.com
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