Understanding VA Loan Requirements: Credit Score, Income, and More

VA Loan Requirements: An Overview

There are a few factors to consider when it comes to VA loan requirements, including requirements set by both the U.S. Department of Veterans Affairs and lenders. 

In order to be approved for a VA loan, you’ll have to meet the following requirements:

VA loan requirements set by the VA

• Service-related eligibility to obtain a Certificate of Eligibility (COE) based on length of service or relationship to veteran
• Plan to live in the home you will purchase (rather than invest)

VA loan requirements set by lenders

• Credit Score
• Income & Debt-to-Income Ratio

In the following sections, we’ll take a deeper dive into these requirements. 

VA Loan Eligibility: How to Obtain Your Certificate of Eligibility

As a veteran who’s served our country, you’ve earned fantastic benefits that can help you buy or refinance a home with a VA loan. Before you can access these benefits, though, it’s important to ensure your eligibility for a VA loan. 

When applying for a VA loan, you’ll need to prove your service with a certificate of eligibility (COE). In order to obtain a certificate of eligibility, you must meet at least one of the following criteria: 

• 90 consecutive days of active-duty service during wartime
• 181 consecutive days of active-duty service during peacetime
• 90 days in the National Guard and Reserves since August 2, 1990, or 6 years in the Selected Reserve or National Guard 
• Surviving spouses of service members who are missing in action, prisoners of war, or have died during active-duty service or as a result of a service-related injury

You can request a COE from the VA online or via mail. You may also ask your lender to obtain the certificate on your behalf. 

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Special Considerations

Don’t meet the service requirements above? You may still qualify for a VA loan if your service ended under the following circumstances:

• Discharge due to hardship, government convenience, or reduction in force
• Discharge for a medical condition or service-connected disability
• Discharge under the early-out program with at least 21 months of a 2-year enlistment

In fact, there are several benefits that veterans with service-connected disabilities are eligible for. For example, most borrowers must pay a VA loan funding fee ranging from 0.5 percent to 3.3 percent, depending on factors like the type of loan, the value, and whether or not you have taken out a VA home loan before. There is an exception, however, for veterans with service-connected disabilities, as well as some surviving spouses and Purple Heart recipients on active duty.

Veterans with service-connected disabilities may also be eligible for a Specially Adapted Housing (SAH) grant, which helps veterans with disabilities modify their homes to meet their needs.

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VA loan Credit Score requirements in Applications

One of the biggest benefits of VA loans is the fact that the credit score requirements are more flexible than those of conventional home loans. In fact, the VA has no minimum credit score requirements for home loans. However, lenders usually do.

Most VA lenders require a minimum credit score of 620, but you may qualify for a VA home loan with a score as low as 500. 

If you have a lower credit score, it’s not necessarily the end of the road. You could still qualify for a VA home loan, but you’ll likely be charged higher interest rates, and you may be required to provide additional documentation to prove you can repay the loan. 

Likewise, higher credit scores could result in lower interest rates and minimal down payments. 

VA Loan Income & Debt-to-Income Ratio Requirements

In addition to your credit score and eligibility, VA lenders will assess your income and debt-to-income ratio (DTI) when you apply for a VA home loan. This is in order to ensure that you are able to afford your mortgage payments, property taxes, and insurance. 

As with credit scores, there are no home loan income limits or debt-to-income ratio requirements set directly by the VA. (If you don’t have your full entitlement, though, the VA does set limits on how much you can borrow without providing a down payment.) 

Most lenders, however, do set debt-to-income ratio requirements for all borrowers. In order to qualify for a VA loan, you typically must have a debt-to-income ratio of 41% or lower. This ratio refers to the amount of your income that must go towards any debt you have.

How to Calculate Your Debt-to-Income Ratio 

Calculating your debt-to-income ratio to determine whether or not you meet the VA loan requirement is simple.

Start with your monthly income (your yearly income divided by 12), then multiply that number by the maximum DTI of .41. If the result is $1640 or lower, congrats! You meet the requirement. 

If, however, you have a higher DTI, you may still qualify for a VA home loan. Your loan application will just have to undergo a more thorough inspection. 

If your DTI ratio is higher due to tax-free income, your residual income exceeds 20% of the acceptable limit, or you have an especially high credit score, you can still qualify–and there may be further exceptions on a case-by-case basis, so don’t fret!

Other Factors That Affect VA Loan Approval

On top of the VA loan requirements we’ve discussed in this guide, there are additional financial factors that can play into your VA loan approval, including:

• Credit history. Good financial history is great to have under your belt. On top of your credit score, lenders will take things like bankruptcies, foreclosures, and delinquency into account.
• Employment history. Consistent employment history is another green flag for lenders. At least two years in the same job or industry will help bolster your application.
• Overall financial stability. At the end of the day, aside from the basic eligibility requirements, it’s important to demonstrate a sense of financial stability that proves you will be able to afford your down payment, mortgages, property taxes, and insurance.

How to Apply for a VA Loan

Applying for a VA loan isn’t as complicated as it may seem. At Commander Mortgage, we make it easier than ever. Here are a few simple steps to bring you closer to your dream home: 

1. Check Your Eligibility: Verify your service history and ensure you meet the eligibility requirements.
2. Obtain a Certificate of Eligibility (COE): Apply for your COE through the VA or your lender.
3. Gather Your Financial Documents: Provide documents such as proof of income, credit history, and employment details.
4. Choose a Lender: Research VA-approved lenders and compare loan terms.
5. Apply for the Loan: Complete your loan application and submit the necessary documents.

Simple as that!

Bottom Line

Overall, one of the many great things about VA home loans is that the requirements are extremely flexible. While most lenders prefer a minimum credit score of 620 and a debt-to-income ratio no higher than 41%, the most important criteria is simply your service. 

If you have a Certificate of Eligibility to prove your service duration (or that you’re a surviving spouse), you already have one foot in the door. The next step is to review your credit score and overall financial health. If needed, you can take steps towards greater financial stability and a higher credit score to increase your chances of the best possible loan terms–and your chances of securing the home you deserve. 

Apply for Your Tailored VA Loan with Commander Mortgage

Ready to take the next step toward homeownership? At Commander Mortgage, it’s our privilege to serve those who have served our country by offering tailored VA home loans. We’re here to help veterans, active-duty service members, and their families navigate the VA loan process with ease. 

Whether you're looking to purchase your first home or refinance, our expert team is here to guide you every step of the way with unparalleled expertise and care. 

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Contact us today to learn more about how you can qualify for a VA loan and secure the best possible terms.