According to the VA, most VA home loans are approved by the lender using criteria and lending guidelines set by the VA. In the process of servicing a VA loan, many people talk of what the VA will approve or won't approve--most articles written about VA loans even talk of the VA in terms of the agency approving your individual loan. In most cases these discussions actually refer to the rules and established precedents covered by government regulations. When the VA needs to handle an individual case, it's usually because the circumstances aren't addressed clearly by existing rules or the lender requires additional information. In these cases, the VA does have the final word. In all others the existing regulations are referred to for guidance.

 VA Purchase Loan Approval Requirements

VA mortgage guidelines require two basic methods to determine if you qualify for a loan. The first is a look at your income-called the residual income method. Can you afford the day-to-day costs of the VA home loan? Are your debts too large to allow you to pay for the monthly mortgage payment too? You car payment and credit card payments plus any other expenses all factor in to the loan approval process. The second qualification criteria is a more specific examination of these issues, boiled down to a formula called the debt-to-income ratio.

 VA Purchase Loan Process

According to the VA, you don't have to submit your credit information and application until you've found a home you want to purchase. If you're working out credit problems or are on the verge of paying off a large debt to reduce your debt to income ration, waiting until you've found a home to apply for the VA home loan may work in your favor. But if you get turned down for the loan because the VA mortgage or the sale price of the home would be too high, you've wasted your time going through the motions of trying to buy that particular home. That's one reason why many people apply for pre-approval for a VA home loan--you know exactly what your loan limit will be and you can house hunt more efficiently.

Ask your loan officer about applying for a pre-approved VA home loan amount. If your credit application is denied, don't give up-ask the lender what you need to do to fix your debt-to-income ratio or credit issues and try again.

The VA Loan became known in 1944 through the original Servicemen's Readjustment Act also known as the GI Bill of Rights. The GI Bill was signed into law by President Franklin D. Roosevelt and provided veterans with a federally guaranteed home with no down payment. This feature was designed to provide housing and assistance for veterans and their families, and the dream of home ownership became a reality for millions of veterans. The GI Bill contributed more than any other program in history to the welfare of veterans and their families, and to the growth of the nation's economy.

With more than 25.5 million veterans and service personnel eligible for VA financing, this loan is attractive and has many advantages. Eligibility for the VA loan is defined as Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continuous days during peacetime. There is a two-year requirement if the veteran enlisted and began service after September 7, 1980 or was an officer and began service after October 16, 1981. There is a six-year requirement for National guards and reservists with certain criteria and there are specific rules concerning the eligibility of surviving spouses.

VA will guarantee a maximum of 25 percent of a home loan amount up to $104,250, which limits the maximum loan amount to $417,000. Generally, the reasonable value of the property or the purchase price, whichever is less, plus the funding fee may be borrowed. All veterans must qualify, for they are not automatically eligible for the program. 

VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home, which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fails to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms

If you are ready, apply now for a VA Refinance loan.