Requirements for VA Loan Approval
Guide to VA Loans
To get a VA loan, the law requires that:
- You must be an eligible veteran who has available home loan entitlement (except in the case of an interest rate reduction refinancing loan);
- The loan must be for an eligible purpose;
- You must occupy or intend to occupy the property as your home within a reasonable period of time after closing the loan;
- You must have enough income to meet the new mortgage payments on the loan, cover the costs of owning a home, take care of other obligations and expenses, and still have enough income left over for family support (a spouse's income is considered in the same manner as the veteran's); and
- You must have a good credit record.
VA guaranteed loans are made by private lenders such as banks, savings and loan associations, or mortgage companies. To get a loan, you apply to the lender. If the loan is approved, VA guarantees the loan when it is closed. The guaranty means the lender is protected against loss if you or a later owner fails to repay the loan.
QUESTIONS AND ANSWERS
1. How much is the guaranty?
VA will guarantee up to 25 percent of a home loan up to $417,000, subject to the amount of entitlement a veteran has available. For loans of more than $144,000 made for the purchase or construction of a home or to purchase a residential unit in a condominium or to refinance an existing VA guaranteed loan for interest rate reduction, the maximum guaranty is 25 percent up to $104,250.
2. Is $104,250 the biggest loan a veteran can get?
No. You may generally borrow up to the reasonable value of the property or the purchase price, whichever is less, plus the funding fee, if required. For certain refinancing loans, the maximum loan is limited to 90 percent of the value of the property, plus the funding fee, if required. To determine the reasonable value, VA requires an appraisal of the property.
3. What is the maximum VA loan?
Although there is no maximum VA loan (limited only by the reasonable value or the purchase price), lenders generally limit the maximum VA loan to $417,000 because most VA loans are sold in the secondary market, which limits VA loans to that amount.
4. Is a guaranteed loan a gift?
No. It must be repaid, just as you must repay any money you borrow. The VA guaranty, which protects the lender against loss, encourages the lender to make a loan with terms favorable to the veteran. But if you fail to make the payments you agreed to make, you may lose your home through tore closure, and you and your family would probably lose all the time and money you had invested in it, i the lender does take a loss, VA must pay the guaranty to the lender, and the amount paid by VA must be repaid by you. If your loan closed on or after January 1, 1990, you will owe the Government in the event of a default only if there was fraud, misrepresentation, or bad faith on your part.
5. Does VA make any loan directly to eligible veterans?
Yes, but only to Native Americans on trust land or to supplement a grant to get a specially adapted home for certain eligible veterans who have a permanent and total service-connected disability(ies). See VA Pamphlet 26-93-1 for information concerning direct loans to Native American Veterans. See VA Pamphlet 26-69-1 for information concerning specially adapted housing grants.