VA Loans: How They Work and Qualifications for 2022
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VA Loan Requirements in 2022

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VA loan requirements won’t change much in 2022, although higher loan limits mean that military borrowers may have more borrowing power to avoid a VA jumbo loan. The U.S. Department of Veterans Affairs (VA) will continue to back VA loans, giving active-duty service members, veterans and eligible spouses a flexible option for buying or refinancing a home.

VA loan eligibility: Are you eligible?

You must meet VA guidelines for military service to be eligible for a VA mortgage. According to the VA, you’re eligible if you served:

  • 90 continuous days of active duty
  • 90 consecutive days during wartime
  • 181 days during peacetime
  • More than six years in the National Guard or Reserve

How to verify your VA eligibility

There are three ways to verify your eligibility for a VA loan:

  • Get an online Certificate of Eligibility (COE). Many veterans can obtain an online COE by inputting their basic identifying information.
  • Provide your discharge papers and send in a form. Your DD214 reflects the number of years you served in the military. You can mail it, along with a completed VA Form 26-1880, to your nearest VA regional processing center.
  • Let the lender obtain it for you. VA-approved lenders can get your COE with your authorization if you apply for a VA loan.

VA loan qualifications

VA guidelines provide more qualifying flexibility for than any other type of home loan. In addition, special safeguards are built into VA home loans to protect military borrowers from excessive lender fees. Here are the most recent VA loan requirements:

Credit score. VA loan requirements don’t include a minimum credit score; however, many VA lenders will set the minimum at 620. Besides credit scores, VA-approved lenders use the Credit Alert Interactive Reporting System (CAIVRS) to verify you haven’t defaulted on federal debt like student loans or a past VA loan.

Down payment. In most cases, VA home loans require no down payment. However, you may need one if you have a current VA loan, own a property financed with a VA loan that was paid off or owe money on a previous VA loan — even if you no longer own the property.

Residual income. VA lenders use a residual income calculator to determine how much free cash you have each month, after paying your monthly obligations from your after-tax income.

The requirements vary based on your family size, the size of your home and location of the property.

The table below shows the residual income requirements for loan amounts above $80,000.

Residual Income Table by Region 

Family SizeNortheastMidwestSouthWest
1$450$441$441$491
2$755$738$738$823
3$909$889$889$990
4$1,025$1,003$1,003$1,117
5*$1,062$1,039$1,039$1,158

*Add $80 for each child up to a family of seven.

Steady income and employment history. Lenders prefer a stable, two-year job history. Recently discharged veterans may get extra flexibility if a new position is related to skills acquired in the military.

Debt-to-income (DTI) ratio. VA home loan requirements recommend a DTI ratio (calculated by dividing total monthly debt — including your housing payment — by your gross monthly income) of no more than 41%. However, the maximum DTI ratio for a VA loan may be higher if you have good credit, high residual income or make a large down payment.

Property requirements. Homes financed with VA loans must meet the department’s minimum property requirements (MPRs). These guidelines ensure that the property is safe, sanitary and structurally sound. VA lenders use a VA-approved appraiser to estimate the value of a home, and the appraiser will note if any obvious repairs are needed. There may be special MPRs depending on the location of the home or for service members in the Specially Adapted Housing program.

Closing cost guidelines. The VA imposes a 1% closing cost cap on VA loans to ensure lenders don’t charge exorbitant fees. That means lender charges for origination fees, credit report, flood certification and tax monitoring can’t equal more than 1% of your loan amount. However, discount points (if you choose to pay them) and the VA funding fee aren’t included in this calculation.

Occupancy. You must live in the home you’re financing with a VA loan as your primary residence. However, you can use the VA interest rate reduction refinance loan (IRRRL) to lower the rate on a rental property you previously lived in.

VA loan limits. VA borrowers aren’t limited by standard conforming loan limits. This means eligible military borrowers can purchase a home over the 2022 limit, which is $647,200 for a single-family home in most parts of the country.

VA funding fee. Most VA loan borrowers must pay a one-time VA funding fee. Since VA guidelines don’t require down payments or mortgage insurance on VA loans, this payment helps to offset the cost of VA loans to taxpayers. Borrowers can choose to pay the funding fee upfront at closing or roll it into the loan amount.

The table below shows the current fees, which vary based on the down payment amount, type of VA loan and whether the VA home loan benefit has been used before.

Type of loanDown paymentFirst-time userSubsequent user
Purchase and construction0%2.30%3.60%
Purchase and construction5% or more1.65%1.65%
Purchase and construction10% or more1.40%1.40%
Cash-out and regular refinance90% maximum loan-to-value (LTV) ratio2.30%3.60%
Interest rate reduction refinance loan (IRRRL)No equity required0.5%0.5%

VA funding fee exemption for disabled veterans

You may be eligible for a VA funding fee exemption if you have a service-related disability. The VA has an online resource to help you determine if you’re eligible for VA disability benefits.

How to apply for a VA loan

These are the most common five steps to getting a VA loan:

  1. Confirm your eligibility. You won’t get to the next step if you don’t have enough entitlement for a VA loan. If you already have a VA loan, make sure you have enough bonus entitlement to buy another house without a down payment.
  2. Make sure you meet the minimum loan requirements. Don’t change jobs, start a new business or rack up credit card debt before you apply.
  3. Shop for a VA-approved lender. Not all loan officers are experienced with VA loans. Gather at least three to five loan estimates and compare the fees to find the best VA loan rates.
  4. Gather your financial documents. Make sure you dig up your military documents ahead of time. If you can’t locate them, it may take a while to have duplicates sent.
  5. Find a home and close your loan. The rest of the process works like a regular loan: Lock in your rate, provide documents, get an appraisal and review your closing disclosure three business days before your closing appointment. Once you sign your paperwork, you’ll be a homeowner.
 

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