The VA loan program provides veterans, active-duty service members, and surviving spouses with great benefits when it comes to purchasing a home. Because a portion of the loan is backed by the federal government through the Department of Veteran Affairs, qualified veterans and active-duty service members can take advantage of this resource to land their dream home.
Most veterans and active-duty service members are eligible for financing through the VA for a loan. However, as with other loan types, certain factors may cause your lender to deny the loan. Hero Loan is happy to explain the circumstances that can cause a loan denial to occur and how to ensure it won’t happen to you.
What are the Requirements for Veterans and Active-Duty Service Members on a VA Home Loan?
VA loans can provide a win-win opportunity for veterans and active-duty service members with their lenders. Lenders like VA loans because their federal backing poses less risk of default, and veterans like the loans because of their more lenient qualifications and better rates and terms compared to conventional loans.
That said, there are still certain criteria set by the VA that veterans and active-duty service members must meet to qualify for a loan. Those who have served in the armed forces must have at least one of the following to qualify:
- Served at least 181 days of active service during peacetime
- Served at least 90 consecutive days of active service during wartime
- Served more than six years with the National Guard or Reserves or 90 days under Title 32 with at least 30 of those days being consecutive
- Are the spouse of a service member who lost their life in the line of duty or as the result of a service-connected disability
Talk to your lender about obtaining the required certificate of eligibility, or CEO, which is used to verify that the above criteria are met.
Why Might a Veteran or Active-Duty Service Member Not Qualify for a VA Loan?
Generally speaking, a VA loan application may be rejected by a lender for similar reasons that other loan types get rejected — mainly if a home buyer has an outstanding financial deficit. There are other reasons for denial, as well, such as the VA’s strident appraisal criteria not being met. Here is a list of possible causes as to why a veteran or active-duty service member may be denied on a VA loan application:
- Need more income. Your lender will check that your income can finance the house you are looking to purchase. The interested home buyer’s income must be verified as full-time, meaning at least 30 hours per week for your employer. Income can come from a variety of sources, but it must meet a minimum set of requirements.
- Need a better credit score. The VA sets no minimum credit score requirements to qualify for a loan; however, this may vary depending on your lender. Our Home Loan expert specialists look at not only the scores but past credit patterns to determine qualification.
- Need a better debt-to-income ratio (DTI). A home buyer’s DTI shows how their debt measures up against your income. Lenders look at DTI to ensure you can repay a loan. Typically speaking, a percentage of 41% or lower, is seen as a positive.
- Needs to meet minimum property requirements (MPRs). An appraisal for a VA loan must meet the requirements set by the VA’s Minimum Property Requirements. These requirements address the property’s interior and exterior safety and value. Although they can make the application process more arduous, MPRs were created to ensure veterans are investing in a property that meets the three s’s: structurally safe, sound, and sanitary.
Other factors that may impact your qualification on a VA loan include late mortgage payments, credit history, bankruptcy filings, federal debts, and foreclosures. Your VA lender is a vested stakeholder in approving your VA loan and will do what they can to make sure this happens.
If you are denied a loan, it is important to get the facts straight as to why so you can directly address the problem or problems. If you have low credit scores, start the process of making repairs. If you don’t make a high enough income to afford monthly payments, borrow less, put down a larger down payment, or get a longer term on your loan. If you get rejected for a VA loan, you shouldn’t give up. Work with your lender to find a solution that fits your financial needs.
How Can Hero Loan Help?
Hero Loan was created to provide an outstanding level of customer service for active-duty military, veterans, and their families. Our mission has been to ensure that our veterans receive a fast, personalized service while supporting Veteran-Owned businesses and events. We have achieved these efforts with great effect through our lending program. In addition, we are proud contributors to the Fisher House Foundation, which directly gives back to our veterans by providing free housing for veteran families during medical procedures.
Let us make your loan application process a breeze by calling us today at (888) 855-1341 to speak with a VA loan representative, or reach out to one of our lending experts who will be glad to address any inquiries you may have through our online application.