VA Loan Eligibly Requirements Can Vary | VA Underwriting Guidelines
Depending on the lender, VA loan eligibility requirements and VA underwriting guidelines vary. For a VA mortgage, some lenders have tougher qualification factors due to requiring stricter underwriting requirements. The three most common qualification factors that can differ by lender is having debt-to-income thresholds, requiring a minimum credit score, or not willing to manually underwrite loans.
VA Underwriting Guidelines
VA mortgage guidelines are published online and anyone has access to the Lender’s Handbook – VA Pamphlet 27-7. Luckily, there is an Automated Underwriting System (AUS) that does not require you to read through all guidelines. The Automated Underwriting System is run by:
- Loan Originators during the pre-approval process.
- Underwriters during the underwriting process.
There are two finding results that you would be looking for. The two findings results are approve/eligible or refer/eligible for manually underwritten loans.
5 Steps to Check Your VA Mortgage Eligibility
1.) Contact a Loan Originator who can put together a list of documentation required for underwriting and processing.
2.) Calculating your VA home loan benefit and entitlement for a Certificate of Eligibility (COE), which can be done by:
3.) Once all of your documentation and information is gathered, the Automated Underwriting System (AUS) will be run to determine eligibility findings.
4.) Go over a comfortable mortgage payment and at this point, your pre-approval letter will be issued.
5.) Connect with a real estate agent and start searching for home.
More Information on the Certificate of Eligibility (COE)
The VA loan eligibility letter, also known as a Certificate of Eligibility (COE), is required in order to determine a borrower’s eligibility for a VA-backed loan. After gathering documentation, a borrower can apply online through the eBenefits portal, apply by mail, or apply through a lender.
Evidence is required and depends on the nature of eligibility, which can be determined by:
A Veteran and a current/former Reserve member or National Guard must have (activated Federal active service): DD Form 214.
Active Duty Service Member
Statement of service, which is signed by:
- Personal office.
- Commander of the unit or higher headquarters.
National Guard members that are a discharged member and have not been activated for Federal active service:
- NGB Form 22 and report of separation and record of service for each period.
- NGB Form 23 and retirement points accounting with proof of character of service.
Surviving spouse in receipt of Dependency and Indemnity Compensation benefits:
- VA form 26-1817.
- Veteran’s DD214 if available.
For a Surviving Spouse not receiving Dependency and Indemnity Compensation:
Lost Documentation for VA Loan Eligibility Letter
Grossing Up Tax Free Income
You can use tax free income and it may be grossed up for the purposes of calculating debt-to-income. Some examples of tax free include can include, but not limited to:
- Disability retirement payments.
- Certain types of public assistance payments.
- Child support payments.
- Military allowances.
- Workers’ compensation benefits.
Temporary income items cannot be included as effective income unless unemployment compensation is a regular part of an applicant’s income. The residual income is always verified that the income is tax free before grossing up.
Key Points for VA Underwriting Guidelines
100% financing is available for even lower credit scores, which maximum debt-to-income ratios are determined by the Automated Underwriting System (AUS).
Manual underwriting option is available, which some lenders will not manually underwrite a VA mortgage.
- Non-traditional credit may be eligible with a minimum of 3 credit references with a 12 month rating for each.
- Cash out up to 90% loan-to-value.
- Need a VA loan eligibility letter, also known as a Certificate of Eligibility (COE).
2 to 4 unit VA multi-unit financing is available, modular homes permanently affixed to the foundation, and condos are eligible as long as they are VA approved. Findings are determined during the pre-approval process, but finalized during underwriting.