VA Loan Requirements.
When speaking of VA loan requirements it is important to understand that there are those requirements set by the Department of Veterans Affairs and those VA loan requirements set by VA lenders or VA mortgage companies.
Below you will find some of the most common VA loan requirements and whether or not they are VA imposed or lender imposed.
VA Loan Requirements set by the Dept of Veterans Affairs.
Military Service:
VA loans are only for active and retired US military service members who are currently serving or have served sufficient time and been honorably discharged. There are cases where the surviving spouse of a service member may also have VA loan benefits. The VA will issue all eligible veterans and active duty service members a VA certificate of eligibility if they have VA home loan benefits available to them.
VA Loan Limits or Guaranty Amounts:
The VA loan limit is set county by county by the VA. The maximum VA loan limit is based on the amount of the loan the Department of Veterans Affairs will "guarantee" the lender. The VA does not lend money or make VA loans; banks do. However, the bank or VA lender will only lend up to the amount that they still have sufficient guarantee or backing from the VA.
Residual Income Requirements:
Unlike conventional loan programs, VA loans do not have a set or required debt to income ration (DTI). The VA has asked that all approved VA loans however meet a certain level of residual income. What the VA is concerned about is that the military home owner has sufficient income left over to live on after making their house payment.
No Appraisal Needed on Streamlines:
VA streamline loans by definition do not require appraisals.
100% LTV allowed on Cash Out Refinance and VA Purchase:
VA loans are special in the sense that because of your military service you are entitled to special benefits. The main benefit of a VA loan is that you can have 100% financing on both VA purchases and VA refinances.
FICO or Credit Score is Not Required on VA loans:
VA loans do not have any minimum FICO or credit score requirements. The VA does want to make sure only those that are capable of making timely payments are approved, however the VA feels there are better measures than the FICO score.
VA Loan Requirements set by Approved VA Lenders.
Prior to the housing crash and financial crisis, most VA lenders were not imposing any additional VA loan requirements. However, in an attempt to correct some of the loose lending standards that caused the real estate melt down, more and more banks and lenders are adding additional requirements or "overlays" on top of those required by the VA.
FICO or Credit Score:
Most VA lenders today are wanting to see at least a 620-640 FICO score on VA loans. It is not uncommon for some lenders to want even higher credit or FICO standards.
Appraisals Needed on VA Streamlines:
Many VA lenders are requiring at least a 2055 or drive by appraisal on VA streamline refinances. Approved VA lenders at LowVARates however, are not requiring appraisals.
Net Tangible Benefit Tests:
Lenders want to make sure if you are refinancing a VA loan that the costs associated with the VA refinance are justified. A simple benefit test used by many VA lenders is for you to take your closing costs and divide that by your monthly savings.
Some Lenders Will Not Refinance over 90% LTV:
Many VA lenders have decided on a VA cash out loan to not lend over 90% of the home's value.
