By Bill Lyons | Published on October 30, 2020
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    Since 1944, the Department of Veteran Affairs has been issuing VA loans to service members and veterans in an effort to help members of the armed forces purchase a home or property. What makes VA loans so attractive is that they typically don’t require a down payment. In addition to no down payments, VA loans don’t require private mortgage insurance (PMI). They also often have much better interest rates than traditional mortgages, making them a highly beneficial option for veterans looking to buy a home.

    However, as with any mortgage, the requirements to acquire one change year to year due to new legislation. The same applies for VA loan requirements for 2020. Throughout this post, we’ll answer important questions, such as, “What do you need to qualify for a VA loan?”, “Is it hard to get a VA home loan?”, “Who qualifies for a VA loan?”, “When do you qualify for a VA loan?”, and more.

    To better understand the VA loan requirements for 2020, continue reading. Or, if you’re looking for specific information regarding VA home loan income requirements, navigate to a section in this post using the links below.

    VA Loan Income Requirements

    As with any mortgage, to be eligible to obtain a VA home loan means you must be able to afford the home you’re looking to purchase with a VA loan. If a VA loan lender deems you a risky borrower, they might not issue you a loan in fears that you might default and fail to pay them back.

    One of the benefits of VA loans is that you’re able to choose your own private lender. However, this means your lender might set different VA loan income requirements and credit requirements in order to receive financing. Below, we’ll go over different aspects of the VA loan income requirements you might expect.

    Income Sources and Qualifying Income

    The Department of Veteran Affairs (VA) backs your loan up in the case that you fail to uphold your loan terms—they don’t issue your loan. Instead, private lenders, such as Griffin Funding, provide VA home loans with peace of mind knowing the VA will pay for a portion of the loan if you default. This means private lenders have a say in certain requirements to be eligible for a VA loan, including income sources that serve as qualifying income.

    Because qualifying income varies from lender to lender, so do the income sources you can use to become eligible for a VA loan. However, some VA home loan income requirements you may have to meet to be able to secure financing through a VA loan include:

    • Full-time income working at least 30 hours per week with your employer
    • Self-employed workers who have a minimum two years history of a sustained amount
    • Part-time workers with a two-year history of part-time work that’s expected to continue
    • Income from interests and dividends from the past two years that’s expected to continue for another three years
    • Income from retirement plans and pensions from the past two years that’s expected to continue for another three years

    Your lender might also look at any assets you might own, such as your savings accounts and investments. As with any mortgage, such as a traditional fixed-rate mortgage or VA loan, you want to show your lender that you can afford to pay off your loan by proving a reliable working history.

    Debt-to-Income Ratio

    In addition to VA loan income requirements, there are also VA home loan debt-to-income requirements you might have to meet. Typically, your debt-to-income ratio refers to the percentage of your gross monthly income that’s used to pay off your debts.

    To qualify for a VA home loan, the standard debt-to-income ratio is 41%. However, with compensating factors, higher debt-to-income ratios have been approved by Fannie Mae’s and Freddie Mac’s automated underwriting systems. To calculate your debt-to-income ratio, simply add up all of your debt obligations, such as credit card debt, student loans, car payments, etc., and divide them by your gross monthly income, which is the amount of money you take home before taxes and other deductions are accounted for.

    Credit History

    Your credit score is often one of the most important factors in determining whether you’re eligible for a loan, as this number tells lenders how responsible you are with paying off debts. Each lender sets its own VA loan credit and income requirements. At Griffin Funding, our VA loan credit requirement for VA purchase loans is to have a minimum FICO score of 580.

    Residual Income Requirement for VA Loan

    If your debt-to-income ratio is too high, your lender might not approve you for a VA loan. However, in some cases, you might be able to qualify for a VA loan with residual income, even with a high debt-to-income ratio. Residual income refers to the amount of money you have leftover once you pay your debt obligations, such as your mortgage, property taxes and insurance, and revolving debt, that’s used for basic necessities like food and clothing.

    The residual income requirement for a VA loan will vary depending on a variety of factors, such as the area you live in, the size of your family, and your mortgage amount. The VA looks at residual income because it wants to ensure veterans will be able to keep their household afloat while paying for their mortgage and other obligations. If your residual income is considered to be too low with a VA loan, you might be denied.

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    Loan Limitations for VA Loans

    Depending on your circumstances, you might not have any VA loan limitations. With the passing of The Blue Water Navy (BWN) Vietnam Veterans Act of 2019, which became effective on January 1, 2020, most veterans are not subject to VA loan limits. In most cases, if you have full entitlement, there will not be any loan limits. Please note that some lenders may add overlays on top of the VA handbook and limit your loan amount to $2 million, $3 million, or $5 million.

    Full entitlement means you haven’t used your VA home loan benefit (both your basic and bonus entitlement) or paid a previous VA home loan in full and sold the property.

    However, if you have remaining entitlement, you might be subject to a loan limit. Some situations where you have remaining entitlement include having a current VA loan that you’re still paying back or owning a property that was paid for with a VA loan. The 2024 loan limits for a VA loan if you have remaining entitlement are based on the county you’re looking to purchase in.

    What Do You Need to Qualify for a VA Loan?

    In order to qualify for a VA loan, you must get a Certificate of Eligibility (COE). Your COE tells your lender that you meet the service history and duty status requirements for a VA home loan. Aside from the VA loan income requirements discussed above, there are certain VA home loan requirements you must meet in order to obtain a COE. The VA loan requirements go as follows:

    • You are a service member that has served at least 90 days during wartime or 181 days during peacetime.
    • You are a veteran that meets the basic length of service requirements, which, in most cases, are 90 days during wartime or 181 days during peacetime.
    • You are a member of the Reserves or National Guard who served at least six years.
    • You are an eligible surviving spouse of a servicemember who died during service or as a result of a service-related injury or disability, is missing in action, or a prisoner of war, and have not remarried.
    • You were a member of a government’s armed forces allied with the U.S. during WWII and are a U.S. citizen.

    You can apply for your COE through the VA website, or you can ask your lender to help you get your COE. At Griffin Funding, we can help you apply for and obtain your COE. Once you meet the eligibility requirements for a COE, along with the VA loan income requirements, you’ll be able to work with your preferred lender and apply for a VA loan.

    The reason lenders are willing to accept borrowers with no down payment or mortgage insurance is because the Department of Veteran Affairs will cover a percentage of your loan if you default, which is called basic entitlement. What is a veteran’s basic entitlement? In 2020, the basic entitlement is $36,000 if your VA loan is under $144,000. If your VA home loan is over $144,000, the Department of Veteran Affairs will cover 25% of your loan, should you default.

    Check Your VA Loan Eligibility

    To check your VA loan eligibility, you can speak with one of our VA loan officers. At Griffin Funding, we can help you obtain your Certificate of Eligibility and go over our income, credit, and debt-to-income ratio requirements.

    Is It Hard to Get a VA Home Loan?

    If you’re a current servicemember, veteran, or spouse, getting a VA home loan can be relatively easy. This is because no down payment is required, which means you don’t have to spend years saving up for the home of your dreams.

    However, in order to get approved, it’s recommended to have a strong credit score and reliable stream of income. If you meet the VA loan income requirements outlined in this post, you can be one step closer to getting approved for a VA home loan.

    When Do You Qualify for a VA Loan?

    You can qualify for a VA loan when you meet the length of service requirements set by the Department of Veteran Affairs. In most cases, you can qualify for a VA loan if you served at least 90 days during wartime or at least 181 days during peacetime.

    Keep in mind that you must also meet the eligibility requirements set forth by your lender.

    Meeting the New VA Loan Income Requirements

    If you’re an active servicemember, veteran, or qualifying spouse looking to finance a new home, a VA home loan can help get you there. Once you meet the VA loan income requirements and obtain your Certificate of Eligibility, you’ll be on your way to securing a new home. At Griffin Funding, we offer competitive rates and terms on our VA home loans, along with flexible requirements to qualify for a VA loan. Speak with one of our helpful loan specialists to get started today.

    Bill Lyons

    Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 22 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 10 years in business.