In addition to military requirements, VA home loans have traditional loan requirements. Even if you get VA home loan pre approval, you must meet these general requirements before receiving your loan. Pre-approval means the lender has taken a soft look at your finances and believes you are eligible for an offer, but the exact details may vary once you apply.
It is a way for the lender to indicate he or she is interested in doing business, while also giving you a basic idea of how much you can get for your loan. It also helps you prepare all the necessary documents once you are ready to apply.
VA loans can be used on either condos or manufactured home. The overall value of the home you want to purchase is one of the biggest factors to determine your eligibility. Higher property value typically leads to larger interest rates, unless you have a particularly high income or are putting down a significant down payment.
Another important consideration for VA loan rates is your credit score. With a traditional home loan, you need a high credit score to apply. Lenders are more lenient with VA loan approval, since the loan is secured by the federal government. However, a low credit score can still hurt your application, resulting in higher interest rates or limiting the total amount your lender is comfortable offering.
Along with credit score, VA loan rates are also affected by your income. Lenders look at your debt-to-income ratio (DTI) when you apply for a loan. Your DTI compares how much of your average monthly income goes into paying your other debts. No matter what your DTI, you can apply for a VA home loan, but lenders are more likely to deny you if you have a poor DTI.
VA loans have a maximum limit. Your VA limit does not apply towards how much you can request from your loan, but anything beyond the limit is not backed by the federal government. As of writing, the VA loan limit is $548,250. For most homes, this is more than enough to cover the cost. For more expensive property, you can apply for a VA jumbo loan.
A major difference between VA home loans and traditional loans is down payment requirements. With a VA loan, you are not required to pay a down payment. You are required to pay a funding fee, which on average ranges from 2.3 to 3.6 percent of your total loan amount.