VA Home Loan Requirements

VA home loan requirements are similar to requirements set by traditional lenders. The Department of Veterans Affairs does not issue direct loans. Instead, it offers to guarantee private loans in order to make the financing more affordable for a veteran. Therefore, the individual borrower should not have financial problems that render him or her ineligible for a private loan all together. The VA can help with some credit flaws, however.

Service Status Requirements

The first factor in any potential VA Home loan is the service status of the individual applying for the assistance. If a veteran is on active duty or has been honorably discharged, the veteran is eligible for full benefits including the VA home loan assistance program. However, a veteran who has been dishonorably or less than honorably discharged may lose all of the benefits previously available. Therefore, if the individual applicant was dishonorably discharged, that applicant will not be eligible for a VA home loan under any circumstances. To prove the discharge was honorable, the applicant must have a discharge paper or number to verify the information when applying for the loan.

Credit History Requirements

Veterans face unique challenges when establishing a credit history. They travel frequently, take out few loans while in the service and may even have collections against them for items that went unpaid when they were unable to be reached in training camp, on base or abroad. As a result, it is very common for members of the military to have low credit scores. The VA is aware of this situation and aims to assist veterans in overcoming the problem. As long as a veteran does not have negative information such as unpaid taxes, loan defaults or foreclosures on his or her record, the VA will accept a less than perfect credit report.

Income Requirements

Veterans may also face unusual income situations. An individual in the armed forces earns an income that is sufficient, but most of the compensation comes in the form of paid living expenses. As a result, the individual may have an income record lower than the average home loan applicant. In addition, once that individual exits the armed forces, it may take some time before he or she earns an income high enough to qualify for some home loans. The VA will assist by issuing guarantees to individuals who have low incomes. However, the limits on the guaranty and on the mortgage loan may be low.

Down Payment Requirements

Since the VA understands the unique financial challenges facing veterans, it may offer low down payment options through the VA loan program. While average lenders ask for around 10 percent down, a VA lender may ask for as little as 3 to 5 percent. The lender knows that, even if the veteran defaults, the VA will step in to pay the loan. As a result, it is not highly risky for a lender to issue a loan with a low down payment in these circumstances. Nonetheless, VA loans still require down payments and closing costs that all qualified applicants must be able to provide.