- 06 Nov, 2023
A Comprehensive Guide to VA Loan Requirements for 2023
Are there any changes to the VA Loan Requirements 2023?
If you’re a veteran or an active-duty service member, you still have a chance to buy that house you have been eyeing. Worry no more! We have 85+ days until the next year starts and you can make the most of the 2023 VA loan.
As we are approaching Veteran’s Day, in this comprehensive guide, we will go through the VA loan requirements 2023, and discuss the steps for the VA loan pre-approval process.
As an added bonus, we will go through some quick ways to improve your credit score if it doesn’t meet the minimum requirements.
What’s the intent behind VA loans?
VA loans are mortgages provided for eligible veterans, active-duty service members, and their spouses. Now, if you are a veteran or a spouse of a veteran, now is the best time to buy a home and call it your own.
The main purpose of a VA loan is to make homeownership accessible and affordable to anyone who has served or is actively serving in the Military.
The U.S Department of Veteran Affairs offers a guarantee, while private lenders such as Veterans United Home loans finance the loan for eligible veterans.
Reasons for VA loan's popularity in the USA
Did you know that VA loans are considered to be one of the most powerful mortgage options available for veterans, active-duty service members, and their spouses?
The reason for this popularity over the last 15 years is that a VA loan provides a handful of financial advantages to veterans compared to other mortgage types.
Here’s why this particular loan type is the most sought-after option for veterans:
No down payment
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One of the attractive benefits of a VA loan is the no down payment option. Irrespective of the loan amount, qualified veterans can purchase their homes without any down payment.
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Compared to other loan types that require home buyers to pay at least 3% of the down payment, a VA loan is much better eliminating the need for an upfront payment.
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This makes homeownership more affordable and achievable without having to face any financial barriers.
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Competitive interest rates
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In comparison to conventional loans, VA loans offer better interest rates ultimately saving thousands of dollars for borrowers over the lifetime of the loan.
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As money spent on interest rates is lower, homeowners can allocate and plan their monthly finances accordingly.
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This helps homeowners manage their housing expenses appropriately along with other important monthly expenses.
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No private mortgage insurance
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Along with zero down payment, homeowners can also relieve themselves from their obligation to pay private mortgage insurance.
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If you had explored conventional loans, you might have noticed the term private mortgage insurance (PMI).
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PMI is a mandatory additional expense that the borrowers are requested to pay to protect the lenders in case of a loan default by the borrowers.
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Generally, borrowers are required to get a PMI if they take a conventional loan with a down payment of less than 20% of the home’s purchase price.
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Flexible credit requirements
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Credit requirements for VA loans are not as stringent as conventional loans. They do have minimum credit score requirements but they are known for their flexibility in evaluating applicants with different credit histories.
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One of the unique features of the credit requirements of VA loans is that they take into account the circumstances of military life.
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This means that even if you have had past credit challenges, you might still qualify for a VA loan.
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It can be a lifeline for many veterans and service members who have faced financial setbacks during their service.
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Limited closing costs
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The VA Home Loan program limits buyer closing costs to mortgage discount points and third-party costs such as government fees.
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If a lender charges a service fee, they cannot charge for overhead costs such as postage, notary, and loan settlement fees.
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Additionally, lenders cannot charge VA home buyers for attorney fees, real estate commissions, and third-party appraisals.
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Can be passed to the next homeowner
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VA-backed mortgages are assumable. They can be assigned to a future home buyer with the mortgage rate intact, even if that buyer is a non-veteran.
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The buyer who assumes the VA home loan must meet standard VA credit and income qualifications and may be subject to a 0.5 percent fee on the remaining loan balance.
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No VA mortgage loan limits
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VA loan limits refer to the amount of money the Department of Veterans Affairs will guarantee on a mortgage loan.
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There is no VA loan limit for first-time home buyers and veterans with full VA entitlement.
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Buyers whose entitlement is less than full are subject to standard VA loan limits which mirror conforming mortgage loan limits.
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VA loan requirements 2023
Now, we can completely agree that VA loans offer valuable benefits to eligible veterans and service members. However, it is important to stay updated on the recent updates and requirements for VA loans.
Determine your eligibility
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To check if you’re eligible, understand if you meet the below eligibility criteria:
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You are an active service member who served for 90 consecutive days during wartime.
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You are a veteran who served for 181 days of active service during peacetime.
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You have served 90 days under Title 32 orders or have 6 years of service in the National Guard or Reserves.
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You are the spouse of a veteran who died during the service period or due to service disability and you haven’t remarried or remarried after the age of 57.
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Spouses of service members who went missing in action or war prisoners are eligible too.
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Obtain a Certificate of Eligibility (COE)
One of the most crucial documents that prove your eligibility for a VA loan is a COE. There are various methods to obtain your COE and you need to make sure that these documents are ready before applying for a VA Loan.
Here are some commonly used ways to get a COE -
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Online application
If you’re looking for one of the quickest ways to obtain a COE, the best way to go is via the VA’s online application portal. Create an account and provide the necessary information and documents to prove your eligibility.
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Through your lender
VA-approved lenders have the ability to request for a COE on your behalf. They will submit the required documents directly to the VA and can help you save time.
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Mailing your application
This is a traditional approach and you can obtain your COE by mailing all your documents via a paper application. The VA form can be downloaded from the website and once processed, you can receive your COE.
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Maintain a minimum credit score
As discussed earlier, a VA loan doesn’t have stricter credit score requirements. However, lenders will have their own credit score benchmarks.
If you still don’t meet the minimum credit score requirements, there are ways to increase your score and hang in there tight, as we are about to learn the strategies to improve your credit score in the next section.
Get your VA loan pre-approved in 4 quick steps!
Getting a pre-approval could be an added value to your homebuyer portfolio. It signals the sellers that you’re a highly qualified buyer. You open doors to the most beautiful home out there. If you want to secure that pre-approval letter, follow these steps:
Prepare your documentation
Gather and organize all the necessary financial documents such as
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A copy of your driver’s license or an identification issued by the government.
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A proof of your DD-214 or Reserve/Guard points statements.
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A statement of service for active duty members.
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Up-to-date copies of your pay stubs & W-2s for the last 2 years.
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A copy of disability award letters.
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Recent bank statements.
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Select a VA-approved lender
To get started with the pre-approval, you need to select a VA-approved lender. Make sure to select your best lender from the list of approved lenders maintained by the Department of Veteran Affairs.
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Lender review and Verification
Once you submit your application, your lender will go through the process of reviewing to check if the information and documentation provided by you are legitimate.
Your income, debts, assets, and credit score are assessed to determine your eligibility for VA loan approval.
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Receive the pre-approval letter & present it to the sellers
Once the lender is done with the review, you will receive a pre-approval letter that outlines the maximum loan amount that you qualify for. With this letter ready in your hand, you can start with the home-buying process by providing it to the sellers.
Guaranteed ways to see an increase in your credit score
This section is dedicated to those individuals who want to improve their credit score and reach the minimum credit score requirements.
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Draw your credit report from platforms such as Equifax, Experian, and TransUnion. Look for any negative factors that impact your credit score. Make sure to rectify it.
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If you have a commitment to paying monthly credit card bills, or loan payments, make sure to set auto payment on so you don’t miss out on payments.
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Avoid opening new credit accounts because when you’re on a mission to improve your credit score, opening multiple accounts will slow down the process and you will hardly see any improvement.
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Seek professional help, as there is no need to battle this alone. There are expert resources available for you to receive guidance.
If you want dedicated VA loan assistance and check your qualifications to receive VA benefits, visit Home Loan Rate of Interest.
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Create a budget and learn the art of handling finances so that you can avoid overspending your credit limits which leads to higher credit card balances.
VA Loans provide veterans with a wonderful opportunity to secure a comfortable home for themselves and their families.
By following the VA loan requirements for 2023 and understanding the VA loan pre-approval steps, you can buy the home of your dreams faster.
Whether it’s your first home or a second property, VA loans are one of the best loan types in the mortgage market. To gain more knowledge about other mortgage options, check out our blogs right away.
