In-depth knowledge of your VA loan requirements ushers in your golden ticket to a new real estate investment or making cost-efficient renovations to your current residence if you’re a veteran or in active service. The Department of Veterans Affairs backs VA loans, so credit unions, mortgage providers, and financial institutions feel more comfortable handing them out. Eligibility for a VA loan is essential for accessing affordable housing options and mortgages with low-interest rates.

We will detail the various hidden charges from a VA mortgage, such as closing costs. If you are unsure whether you qualify for a VA loan, read on, and call our customer service hotline if you need more information.

What Is a VA Loan?

A VA loan represents one of the most sought-after benefits for people in the service. Many people join the military after high school to qualify for a VA loan as it fast tracks their achievement of the American Dream. When you want to buy a home, VA loans allow you to get cost-efficient interest rates, higher loan limits, and more lenient payment schedules on mortgages, even with a tarnished credit score.

If you’re a veteran or currently serving the U.S. military, you have an excellent chance of qualifying for a VA loan. However, not everybody with a service record can get one.

Is Getting a VA Loan Worth It, or Should You Stick to a Conventional Loan?

As one of the leading providers of conventional and VA loans in Illinois, people ask us about the difference between an ordinary home loan with less accompanying paperwork and a VA-backed loan all the time. Banks and other lending institutions classify VA loans as non-conforming loans because the government affords them more lenient credit requirements.

As mentioned earlier, VA loans have lower interest rates that will vary depending on your loan size, length of term, and payment frequency. According to recent data from Ellie Mae, conventional fixed-rate loans had an average interest rate of 2.99% in 2020, while VA loans had 2.72%.

According to the VA, Chicagoans got over 26,000 VA loans in 2021, about 17,000 of them for refinancing. In the following section, you’ll find out how these 26,000 soldiers, technicians, and veterans were able to get the government to play a more active role in taking care of their housing and financing needs.

Components of Eligibility for a VA Loan

Even though the government allows banks and private lenders to control minor aspects of VA loans, such as acceptable credit scores, it mandates requirements that all institutions must follow. Not everyone in the Armed Forces can qualify for a VA loan, so let’s review a complete list of eligibility requirements:

  • You must have an active service record of at least 181 days in peacetime.
  • You must spend 90 consecutive days on the job during wartime.
  • You have a tenure of six years in active service with the Reserve forces or the National Guard.
  • You have at least 90 days of active service in the Reserves or the National Guard under Title 32, with 30 of these days consecutive.

If you meet one of these VA loan requirements, you’re qualified, even if you’re still in active service. If you’re married to a service member who dies in the line of duty or because of a duty-connected injury or disability, you also qualify for a VA loan if you have not yet remarried.

The National Defense Authorization Act of 2020 enforced a few changes on the Dependency and Indemnity Compensation remarriage rules. If surviving spouses of veterans remarry on or after January 5, 2021, and they’re over 55 years old, they still qualify for a VA loan. Before this amendment, spouses were not eligible for a VA loan if they remarry before their 57th birthday.

What Documents Do You Need to Comply With VA Loan Requirements?

A Certificate of Eligibility tells private mortgage lenders that you meet eligibility requirements for a VA loan. Without a COE, it will be impossible to get the perks promised by the VA, even if you meet all the requirements.

VA Loan Requirements for Veterans

If you’re a veteran, you only need a genuine copy of your DD Form 214 to earn a COE. Your DD Form 214 details your military education, place of entry, dates of active duty, ranks, citations, campaign awards, and information about your separation from the service.

The Department of Defense also calls Form 214 a Certificate of Release and issues it at your final out-processing interview upon retirement or discharge. If you can’t find your copy, you can get a new one through eVetRecs.

VA Loan Requirements for Service Members in Active Duty

If you’re in active service, you can get a VA loan even if you work overseas. You only need a Statement of Service letter that details the following:

  • Your full legal name
  • Birthdate
  • Social Security number
  • Previous discharges and breaks from service
  • Name of the adjunct superior, personnel officer, or unit commander with an affixed signature

A complete Statement of Service is the fastest route to a COE.

VA Loan Requirements for Reserve Forces and National Guard Members

If you’re in the National Guard or the Reserve forces, you need a Statement of Service letter identical to members in active duty before applying for a COE.

VA Loan Requirements for Discharged Service People From the National Guard
Discharge elements of the National Guard need:

  • National Guard Report of Separation and Record of Service or NGB Form 22, which should prove that you were in active service long enough to be eligible for a VA loan
  • NGB Form 23 from the Retirement Points Accounting System, an automated form that details your estimated retirement pay, years of active service, and retirement points

Getting NGB Form 22/23 may require extra work because the National Guard does not have a central archiving system. Ask the Adjutant General’s Office of the National Guard in your state to furnish you with these forms before applying for a COE.

VA Loan Requirements for Former Selected Reserve Members

If you’re a discharged member of the Selected Reserve, you need two documents before requesting a COE:

  • Honorable Discharge Certificate
  • Annual Retirement Points Statement

VA Loan Requirements for Surviving Spouses

If you’re a surviving spouse, you can apply for a COE after the death of your significant other if you have access to their DD Form 214. You also need to fill out a VA Form 21P-534, which you can download from the Veteran Affairs website and send to the Pension Management Center in your state. If you’re getting dependency benefits, you need to download, print, and fill out VA Form 26-1817 or a Request for Determination of Loan Guaranty Eligibility.

After filling out these documents, you can upload copies to the VA eBenefits portal or mail them with a completed Form 26-1880.

VA Loan Requirements From Your Lender

Once you obtain a COE, you can enjoy one of the most remarkable benefits of your or your spouse’s work in the military. You can present it to your lenders along with data about your current assets, income, and credit score. Of course, you also need to choose the right property to buy. Use the following questions as a useful guide.

  1. What Property Are You Planning To Buy?

Real estate ranks as one of the safest and most popular investments for veterans and personnel on active duty. You can use your VA loans to finance and purchase single-family and multi-family homes, along with manufactured homes and condos. However, different lenders accommodate different property types, and some may disapprove of loans for manufactured and mobile homes.

You need to list the property you purchase as your primary residence within 60 days of buying it. You can’t legally purchase secondary homes, timeshares, and investment properties with proceeds from a VA loan.

            2. Do Credit Scores and Annual Income Matter?

Lenders reserve the right to accommodate only people with credit scores they find acceptable. Most lending institutions in Illinois accept loanees with credit scores between 580 to 620. They will also evaluate your capability to pay back your loan, which they will express in your debt-to-income ratio or the portion of your monthly income that will go toward paying back the money you owe.

            3. Does the VA Have a Loan Limit?

There is no cap on how much you can loan from the VA, but they can limit the guarantees they provide lenders if you default. In most states, that limit is $548,250, but it can vary in high-income and high-cost cities.

            4. Are VA Loans Down-Payment-Free?

VA loans require 0% down. However, many lenders only accommodate down-payment-free loans from people with a credit score above 580. VA loans are also not immune to closing costs, such as origination fees that you pay your lender and the VA funding fee, which you hand to the Department of Veteran Affairs.

            5. Do You Need Leftover Money in the Bank?

Lenders require some form of assurance that you’ll be able to start paying back your loan after clearing its upfront costs, and most of them want to see leftover money in your bank account. The rule of thumb is to have two months’ worth of payments in reserve.

Have More Questions About VA Loan Requirements?

If you’re still unsure about whether you satisfy VA loan requirements, contact the most trusted mortgage professionals in Illinois for more information. Contact A and N Mortgage today by calling 773-305-5626.

A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.