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:
Going through the Department of Veterans Affair’s eBenefit portal or applying through a mortgage company. Lenders have access to the WebLGY system and can quickly navigate through the system.
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:
Veteran
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:
- Adjutant.
- 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
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:
Need to submit a VA form 21P-534, DD214, marriage license, death certificate or DD form 1300, and mail to the appropriate PMC States.
Lost Documentation for VA Loan Eligibility Letter
In order to request military service records, a borrower should go to the National Archives website or ask a Mortgage Loan Originator on how to obtain lost documentation.
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.
