The U.S. Department of Veterans Affairs (VA) offers eligible veterans, service members, and surviving spouses access to zero-down mortgages. While the VA provides generous terms, lenders have the discretion to establish their own criteria, including minimum credit scores and additional requirements for VA home loans. The VA also imposes certain stipulations. This article provides an overview of the diverse qualifications for VA home loans and their variations among lenders.

Here are the primary requirements for obtaining a VA-backed purchase loan:

  • You must qualify for and obtain a Certificate of Eligibility (COE) based on your military service record, including:
    • Veterans meeting minimum service requirements
    • Active-duty service members with a specified minimum period of service
    • Some members of the Reserve and National Guard
    • Eligible surviving spouses
  • The property being purchased must be your primary residence (not an investment property).
  • You must meet the lender’s underwriting requirements, which include criteria for creditworthiness and income.

Since 2020, VA loans no longer enforce loan limits for qualified borrowers. This means first-time VA loan borrowers are not restricted in the size of their loans. While an appraisal or home inspection may still be required to ensure the property’s valuation, there is no predetermined dollar amount restriction.

Additionally, most borrowers are required to pay a VA loan funding fee. This fee ranges from 0.5 percent for certain refinances to 3.3 percent for some home purchases. The exact amount varies based on factors such as the loan’s value, type, down payment amount, and whether it’s your first VA loan. However, veterans with service-related disabilities and some surviving spouses are exempt from paying the funding fee. Active-duty Purple Heart recipients are also exempt.

The VA does not impose strict regulations on the loans it guarantees or establish borrower qualifications. Instead, the lender issuing the VA loan applies its own underwriting criteria. Therefore, factors such as the applicant’s credit score, income, and existing debt typically influence the loan approval process.

While the VA itself does not enforce a specific minimum credit score for VA home loans, lenders typically prefer to see a credit score of 620 or higher. Lenders set their own underwriting standards based on the borrower’s overall risk profile.

The VA does not establish specific income or debt thresholds, but it does consider the interaction between these factors. Generally, borrowers are expected to maintain a debt-to-income ratio of 41 percent or lower. This means that your total monthly debts should not exceed 41 percent of your gross monthly income. There are exceptions, such as adjustments for tax-free income, but keeping your DTI ratio below 41 percent is important for meeting VA home loan requirements.

With a VA loan, you are not required to make a down payment as long as the purchase price does not exceed the appraised value of the property.

Once again, the VA does not require home inspection, but it’s advisable to conduct one independently to assess the property’s condition before purchase. Your lender may require a home inspection as part of their own requirements.

However, the VA does mandate a property appraisal, a process also commonly required by lenders. The appraisal ensures that the purchase price aligns with the property’s market value, typically by comparing it to recent sales of similar properties nearby. It also verifies that the house meets the VA’s minimum property standards.

Once you determine your eligibility for a VA loan, the next step is to begin searching for a lender. It’s wise to compare offerings from at least three lenders to secure the most favorable VA loan rate and terms. Once you’ve identified the lender that meets your needs, proceed with formally applying for the VA loan.