The first step in receiving your VA benefits, including your VA home loan benefits, is to prove that you are eligible for them. It’s not enough to say that you are a veteran of the military, Reserves, or National Guard. You must prove that you served enough time and that you had the right type of discharge.
In general, you need a discharge other than dishonorable in order to receive VA benefits. This means honorable, under honorable conditions and general discharge. The only exception to this rule would be if there is some type of special circumstance that left you with a dishonorable discharge. This would be determined on a case-by-case basis.
What is a General Discharge?
General discharge means that you were discharged with satisfactory performance, but there is some area that you did not meet the requirements. There was some type of no judicial punishment that you received for failure to meet the military expectations or for some type of misconduct that wasn’t bad enough to warrant a dishonorable discharge.
What Else Do You Need to be Eligible for a VA Home Loan?
Once you know your discharge type, you should also focus on your time served in the military and/or Reserves as this determines your eligibility for a VA home loan benefit as well.
You must serve at least:
- 91 days during wartime in the regular military
- 181 days during peacetime in the regular military
- 6 years in the Reserves or National Guard
If you can prove you served enough time and that you have the right type of discharge, you are eligible for the VA loan. You’ll receive a Certificate of Eligibility, which your lender will need to process your VA loan.
Qualifying for the VA Loan is Different
Don’t make the mistake of assuming that if you are eligible for a VA loan that you automatically qualify. You have to prove that you can afford the loan. The VA does have flexible guidelines when it comes to qualifying, but you still have to prove that you can afford it.
You must meet the following guidelines:
- 620 credit score
- 43% maximum debt ratio
- No federal defaulted loans
- Stable income and employment for the last 2 years
- Proof that you will live in the home as your primary residence
These are the general guidelines set by the VA, with the exception of the credit score. Many lenders require at least a 620 score or higher even though the VA doesn’t have a set score.
VA approved lenders are also able to add what they call lender overlays. These additional requirements are on a lender-by-lender basis. For example, one lender may require that you have a 650 credit score and a 38% max total debt ratio. The next lender you apply with may require a 620 credit score and 43% debt ratio.
It’s important that you shop around once you know that you are eligible for a VA loan. Each lender has different requirements and even charges different fees and interest rates. Find the lender that works the best for you and get the most out of your VA home loan benefit.