VA Loan Requirements and Benefits Overview

09.15.2020 | Category: Homebuying

Since 1944, the VA home loan has helped thousands of our nation’s bravest citizens achieve the dream of homeownership. One of the most popular and enduring programs of the The Servicemen's Readjustment Act of 1944 commonly known as the G.I. Bill is the VA home loan. The VA home loan program is a mortgage program backed by the U.S. federal government that helps service members, veterans, active military and eligible surviving spouses become homeowners. The VA home loan allows qualified US service members and veterans to purchase or refinance a home at competitive interest rates and with $0 down payment. In addition, VA home loan benefits include reduced closing costs, no private mortgage insurance (PMI) or penalties for prepayment.

While the VA loan is a federal program, the government generally does not make direct loans to applicants. Private lenders, including Mutual of Omaha Mortgage, finance the loan while the Veteran's Administration offers an insurance guarantee. This guarantee provides an incentive for private lenders to offer loans with better terms and protects them in the event of a customer default.

The VA loan has helped bring home ownership within reach for millions of active duty and veteran service members with relaxed credit requirements and qualifications.

VA Loan Benefits

Eligible veteran and military homebuyers can take advantage of the following VA loan benefits:

$0 Down Payment On VA Loans: One of the most popular benefits of the VA loan is that borrowers can finance 100% of their new home. Down payments can be a barrier for many who wish to purchase a home. With a VA home loan, veteran and military homebuyers don’t have to worry about coming up with large sums of money for a down payment.

Competitive Rates: As an added benefit, VA loans typically offer better interest rates – and average anywhere from .5% to 1% lower than conventional loan interest rates. Mutual of Omaha Mortgage publishes its rates daily on the Mortgage Rates page.

Relaxed Qualifications: The primary goal of the VA loan is to bring homeownership within reach for veteran and military homebuyers. VA-eligible loan applicants aren’t held to as strict of credit requirements as their conventional loan counterparts. If you have a less-than-perfect credit history, it’s still worth reviewing your options with a Mutual of Omaha Mortgage loan officer.

No PMI: Generally if you put less than a 20% down payment on your new home purchase, you’ll be subject to paying PMI (or Private Mortgage Insurance). VA home loans, with their $0 down financing option, do not have a PMI requirement. To learn more about the benefits of a VA loan, contact a Mutual of Omaha Mortgage VA home loan specialist today.

VA Loan Requirement

So, who is eligible for a VA loan? To obtain a VA loan, you must meet the service level requirements set forth by the U.S. Department of Veterans Affairs, have your Certificate of Eligibility, and meet the income and credit standards set by your lender.

Understanding Service Level Requirements

The service level requirements for a VA loan generally depend on when you served and for how long. You may be eligible for a VA Loan if you served 90 consecutive days during wartime, 181 consecutive days during peacetime, 6 years in the national guard or reserves, or if you are an eligible surviving spouse. Here are some more helpful details on VA borrower eligibility:

Active-Duty Service Personnel: If you are currently on active duty, eligibility can be established after 90 days of continuous active duty service. Upon discharge or release from active duty, eligibility must be reestablished.

Veterans: To help breakdown the VA loan qualification requirements for veterans, check out the below chart documenting the different service tenures:

Status	Qualifying Wartime & Peacetime Periods	Qualifying Active Duty Dates	Minimum Active Duty Service Requirement
Veteran	WWII	09/16/1940 – 07/25/1947	90 total days
	Post WWII	07/26/1947 – 06/26/1950	181 continuous days
	Korean War	06/27/1950– 01/31/1955	90 total days
	Post-Korean War	02/01/1955 – 08/04/1964	181 continuous days
	Vietnam War	08/05/1964– 05/07/1975 *For Veterans who served in the Republic of Vietnam the beginning date is 02/28/1961	90 total days
	Post-Vietnam War	05/08/1975 - 09/07/1980 *The ending date for officers is 10/16/1981	181 continuous days
	24-month rule	09/08/1980 - 08/01/1990 *The beginning date for officers is 10/17/1981	24 continuous months. – OR The full period (at least 181 days) for which you were called or ordered to active duty
	Gulf War	08/02/1990 - Present	24 continuous months. – OR The full period (at least 181 days) for which you were called or ordered to active duty

National Guard & Reserve Member (08/02/1990 – Present)

Six years of service in the Selected or National Guard, AND

Were discharged honorably, OR
Were placed on the retired list, OR
Were transferred to the Standby Reserve or an element of the Ready Reserve other than the Selected Reserve after service characterized as honorable, OR
Continue to serve in the Selected Reserve

You May Also Be Eligible for a VA Loan If:

You are an un-remarried spouse of a Veteran who died while in service or from a service-connected disability
You are a spouse of a Service Member missing in action or a prisoner of war
You are a surviving spouse in receipt of Dependency and Indemnity Compensation (DIC) benefits in cases where the Veteran’s death was not service-connected

If you think you’ve met your service level requirement for a VA loan, your Mutual of Omaha Mortgage loan officer will be able to help you pull your Certificate of Eligibility.

Additional VA Loan Requirements:

In addition to service level requirements, to be eligible for a VA loan, you must also meet the credit and income guidelines for your mortgage. We’ll dive into those requirements next:

A Reliable Income Source - You’ll need to be able to show your lender that you have a consistent and stable income source that will allow you to meet your monthly mortgage payments.

Credit Score - Due to the coronavirus pandemic, credit score requirements have tightened across the entire mortgage industry. Generally, to be eligible for an VA loan you will need to have a credit score of at least 620.

VA Loan Limit - In most parts of the U.S., veterans who qualify for the VA Loan can purchase a home worth up to $510,400 without putting any money down: borrowers in high-cost counties may be able to purchase homes far exceeding that amount without a down payment. With a required minimum down payment, Mutual of Omaha Mortgage will authorize VA loans above county limits in excess of $1.5 million.

VA Property Requirements - The property that you wish to purchase must be your primary residence - it cannot be a second home or investment property. However, it can be used to buy a one-to-four unit home, as long as you use one unit as your primary residence.

Your VA benefit can also be used to purchase a condo - as long as the condo has been approved by the Department of Veteran Affairs. In order for the condo to be approved, at least 50% of the units in the complex must be occupied by their owners and 75% of the community must be current on their HOA payments. If you’re looking to purchase a new condo or townhouse, the VA will not approve the complex until at least 75% of the units have been sold.

A Mutual of Omaha Mortgage VA home loan specialist can help you assess your VA loan eligibility and review your home loan financing options.

Understanding VA Closing Costs & Funding Fee

A common misconception about VA loans is that their closing costs are higher. This is simply not true, but it’s important to note that there is a mandatory funding fee on all VA mortgages (unless the borrowing veteran has a VA related disability, then the funding fee is waived). The funding fee is due at the time of closing, but clients have the option to finance the VA funding fee into their home loan. The funding fee for a VA loan depends on down-payment and whether you’re a first-time homebuyer or if this is your second or subsequent loan.

Funding Fee Table

Type of Loan	Down Payment	Percentage for First Time Use	Percentage for Subsequent Use
Purchase & Construction Loans	None	2.30%	3.60%
	5.0 - 9.99%	1.65%	1.65%
	10% or more	1.40%	1.40%
Cash-Out Refinance Loans	N/A	2.30%	3.60%
IRRRLs	N/A	0.5%	0.5%
Loan Assumptions	N/A	0.5%	0.5%

One of our VA loan officers would be happy to provide you with a custom loan quote.

Occupancy Requirements for VA Loan Eligibility

Veterans and active duty military members who wish to use their VA home loan benefit will have to certify that they intend to occupy the house that they’re purchasing as their primary residence.

The VA stipulates that the veteran must move into the home within 60 days of closing on their loan, or within 1 year with an acceptable reason. It’s important to note that when it comes to the occupancy rule, a spouse is considered an extension of the veteran and can meet the occupancy requirements.

Along with occupancy requirements, the veteran or active duty military member must stay in the home 1 year or have a valid change in circumstance. Common valid changes of circumstances are job transfers/relocations, divorce, family size change, or death. As a good rule of thumb, if your reasons for leaving start with “I don’t like...” it probably isn’t a valid change in circumstances.

Mutual of Omaha Mortgage Can Help You Understand VA Loan Guidelines

If you’re serving or have served in the military and are looking to purchase a home, the VA home loan is an incredible benefit that you should consider. Contact a Mutual of Omaha Mortgage loan officer to determine your VA eligibility or give us a call at 1-800-24-RATES.