Prequalifying for a VA home loan is an important first step for servicemembers and veterans looking to leverage their VA benefits to purchase a home. Going through the prequalification process allows you to get an estimate of the loan amount you may qualify for, assess your eligibility, and start gathering needed paperwork.
In this comprehensive guide, we’ll walk through the basics of VA loan prequalification, the documents you’ll need, what lenders look at, and tips for making the most of this process.
What is VA Loan Prequalification?
VA loan prequalification provides an initial snapshot of your potential borrowing power. It’s a conversation between you and the lender where you provide details on income, debts, credit, and more.
The lender uses this information to make a preliminary assessment of factors like
- Your loan eligibility based on service requirements
- The loan amount and monthly payments you may be able to afford
- Your current credit scores and any potential issues
Prequalification is an important planning tool. It helps you understand how much home you can realistically afford before you start seriously house hunting.
Why Prequalify for a VA Loan?
There are a few key reasons prequalification is recommended
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Get an Accurate Picture of Affordability – Prequalification gives you an estimate of your true price range. This prevents disappointment later on from finding dream homes only to discover they are out of reach.
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Assess Readiness – The prequalification conversation identifies any potential issues with your VA eligibility, credit, income or debts. You can then start taking steps to resolve these items.
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Compare Options – You can and should prequalify with multiple lenders. This allows you to compare factors like rates, fees, and overall experience.
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Ease the Full Process – Prequalification gets the ball rolling by starting your paperwork. This makes the eventual full approval process quicker and smoother.
Step 1: Check Your VA Eligibility
Only veterans, active duty servicemembers, and select spouses are eligible for VA loans. So the first step is making sure you qualify based on your time in service.
Here are some of the main VA home loan eligibility requirements:
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Minimum Duty Period – Generally 2 years, though exceptions exist for those discharged due to disability. National Guard/Reserves need 6 credible years.
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Discharge Type – Must be discharged under conditions other than dishonorable. Bad conduct discharges don’t qualify.
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Surviving Spouses – Qualify in certain cases if the deceased veteran met service requirements.
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Current VA Entitlement – You need enough of your VA home loan benefit remaining. Each use requires a portion of your total entitlement.
Confirm your eligibility through documents like your DD-214 discharge papers or Statement of Service from your commanding officer.
Step 2: Check Your Credit Scores
The VA itself does not require a minimum credit score. But most lenders will establish their own credit standards for VA loans. This helps mitigate their risk.
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A credit score of 620 or higher is a good baseline benchmark that meets many lenders’ requirements. The higher, the better.
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Your total credit profile matters too – not just the score. Issues like foreclosures, judgments, and high debt impact your loan chances.
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Ask lenders to pull your credit reports and scores so you can both assess your credit standing. Fix any errors on your reports immediately.
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Know that mortgage shopping within a 45-day period only counts as one hard credit check, so shop around!
Step 3: Gather Key VA Loan Documentation
During prequalification, start pulling together documents lenders will need to verify your information. This includes items like:
- W-2s and tax returns to show your income
- Bank statements to confirm your assets
- A month of pay stubs to prove your employment
- Veteran’s DD-214 discharge papers
- Debt information like student loan and credit card statements
The more complete your paperwork, the faster the rest of the mortgage process can proceed.
Step 4: Have a Prequalification Conversation
During prequalification, the loan officer will ask for details on your financial situation, including:
- Your desired purchase price and down payment
- Income sources and monthly amounts
- Employment details and history
- Monthly debt payments and obligations
- Assets such as retirement and bank accounts
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Be honest and thorough in providing these details. Inaccurate info will only delay or derail your home loan later.
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Rounding up your income or downplaying debts may get you “prequalified” for more, but could ultimately disqualify your full application.
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Be upfront about past credit issues – the lender will see them anyway on your reports.
Step 5: Review Your VA Loan Prequalification Letter
After collecting your information, the loan officer will provide a prequalification letter with initial loan estimates. This letter outlines:
- The maximum loan amount and month payments you may qualify for
- Your projected interest rate ranges
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The estimates aren’t guaranteed – full approval will provide final terms. But this gives you an approximate idea of affordability.
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Shop and compare prequalification letters from multiple lenders to find your best fit.
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Ask the lender to explain any unclear or disappointing projections so you understand why.
Tips for VA Loan Prequalification in 2024
Here are a few pointers to help you make the most of the prequalification process:
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Don’t Go at It Alone – Lean on a loan officer to guide you through every step and document. VA loans have intricacies, so expert help is key.
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Start Sooner Than Later – Give yourself plenty of time in case any credit or eligibility issues crop up that need fixing.
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Compare Multiple Lenders – Each lender will assess you differently, so cast a wide net. Compare options to find the best fit.
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Ask Questions – If you don’t understand any aspect of your prequalification assessment or letter, request clarification from the loan officer. Don’t leave confused.
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Be Honest – Attempting to inflate your financial credentials will only lead to headaches and delays down the road.
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Have Realistic Expectations – Prequalification gives you your true price range – don’t be disappointed if it’s lower than hoped. Now you can set proper expectations before falling in love with a home.
Prequalification Is Just the Start
Prequalification gives veterans and servicemembers an initial snapshot of their VA loan potential, eligibility, and affordability. It’s an essential process, but only the first step on the path to buying a home with a VA loan.
After prequalifying, the next key steps are getting fully preapproved and having your full application underwritten for final approval.
At each phase, the scrutiny and documentation required increases. The time to manage expectations and tackle any issues is during prequalification – not once you’ve already made an offer!
Hopefully this guide provides a helpful VA loan prequalification overview. The process is easy with proper preparation and a trusted lender at your side.
Frequency of Entities:
veterans: 10
va loans: 15
va loan: 28
prequalification: 17
lenders: 10
credit: 9
If Your Credit Scores Fall Short
So, what happens if you don’t meet a lender’s credit score cutoff? While some lenders may allow for compensating factors, others might simply send you packing if you fail to meet their credit score requirements. Veterans United takes a different approach.
We created an entire department dedicated to helping service members, Veterans and military families improve their credit and get on the path to loan prequalification.
If were not able to prequalify borrowers, they have the opportunity to work with the credit experts in our Lighthouse Program®.
Our Lighthouse Program® consultants:
- Identify and help you correct errors on your credit report
- Establish a plan to strengthen your overall financial profile
- Develop personalized objectives to reduce debt
This is a free service open only to Veterans, service members and military families. The Lighthouse Program® has helped more than 30,000 Veterans and service members overcome their credit challenges and go on to close on a home loan.
By going through prequalification, buyers can identify and start working on potential financing or VA eligibility roadblocks. Does your credit score fall a bit short? Is your income likely to be a problem?
Prequalification is the time to isolate and start addressing these issues. Once you’ve been prequalified for a VA home loan, the next step is loan preapproval.
About Our Editorial Process
Veterans United is recognized as the leading VA lender in the nation, unmatched in our specialization and expertise in VA loans. Our strict adherence to accuracy and the highest editorial standards guarantees our information is based on thoroughly vetted, unbiased research. Committed to excellence, we offer guidance to our nations Veterans, ensuring their homebuying experience is informed, seamless and secured with integrity.
Can you prequalify for a VA loan?
Yes, prequalification is the initial step in the VA loan process and is generally quite simple. It provides an estimate of how much you might be able to borrow based on the information you provide to the lender.
You can think about loan prequalification as a “first interview” of sorts. Prequalification helps lenders achieve three main goals:
- Assess a borrower’s service and credit eligibility
- Estimate the loan amount a borrower may obtain
- Begin gathering documentation needed for preapproval and loan underwriting
The prequalification process also holds key benefits for prospective borrowers. It’s a non-binding step you can take with multiple lenders, which will help you compare rates and terms. It’s typically a 10-minute conversation.
With your permission, lenders conduct what’s known as a “hard inquiry” to obtain your current credit scores. A hard credit inquiry can ding your credit score, although it’s typically only a few points, if any. When you’re shopping for a mortgage, the credit bureaus won’t count every hard inquiry against you. Instead, they’ll typically consider all lender inquiries within a 45-day period as one single check, which minimizes any harm to your credit and allows you to comparison shop.
The VA doesn’t have a built-in credit score to qualify for this program. But it’s important to remember the VA doesn’t make home loans. Instead, it basically provides a form of insurance on behalf of qualified borrowers. It’s ultimately up to lenders, like Veterans United, to decide whether to make a home loan.
Because lenders take on most of the risk with each loan, they’re allowed to introduce requirements and standards that go beyond what the VA wants to see. You’ll often hear these additional requirements called “overlays.” A credit score cutoff is among the most common.
Different lenders can have different credit score requirements. You may also need a higher score if you’ve experienced a recent bankruptcy or foreclosure or if you’re seeking a jumbo loan. Generally, a 620 FICO score is a pretty good barometer for VA lenders.
In addition, any co-borrowers on the loan would also need to meet the lender’s credit score requirement.
If you’re purchasing in one of the nation’s nine community property states, lenders can consider your spouse’s credit and debts even if he or she won’t be on the loan.
Answer a few questions below to speak with a specialist about what your military service has earned you.
Along with checking your credit, lenders will also seek to learn more about your employment, your income and your overall financial and homebuying goals.
Different lenders may take different approaches to the prequalification conversation. But it’s common for loan originators to ask you about:
- Your desired loan amount
- Your current and previous employment
- Your gross (pre-tax) monthly income
- Your assets, like bank accounts and retirement funds
- Your monthly liabilities (day-care costs, child support, alimony, etc.)
- Any previous bankruptcies, foreclosures or judgments
- Any delinquencies or defaults on federal debts
- Whether you’ve recently owned a home
Lenders will also get a good look at your major monthly debts from your credit report. They’ll use those and the income information you provide to calculate an initial debt-to-income (DTI) ratio. For VA loans, this key mortgage industry metric looks at your monthly debts in relation to your overall monthly income.
They’ll calculate this figure based in part on the loan amount you’re seeking. And that means flexibility can be important for prospective borrowers whose DTI ratio is on the edge. Depending on the lender’s requirements and your unique situation, you may need to seek a lower loan amount to get a workable DTI ratio.
The VA typically wants to see a DTI ratio of 41 percent or less. But it’s possible to go above that and still secure financing. Lenders will usually have their own maximum allowable DTI ratio. Low credit and high DTI ratio are two of the most common reasons why some prospective buyers are unable to get prequalified.
VA Loans: Qualifying in 2023 (Everything you should know)
FAQ
Can you prequalify for a VA loan?
What credit score is needed to qualify for a VA loan?
How long does it take to get pre-approval for a VA loan?
How do I get a VA loan preapproval?
When you’re ready to get started on your VA loan preapproval, contact an approved VA home loan lender to start the process. Top VA loan lenders are able to confirm your VA loan eligibility by pulling your Certificate of Eligibility through the VA’s automated system.
Can I get a certificate of eligibility for a VA home loan?
We offer VA home loan programs to help you buy, build, or improve a home or refinance your current home loan—including a VA direct loan and 3 VA-backed loans. Find out if you can get a Certificate of Eligibility (COE) to show your lender that you qualify for a VA direct or VA-backed home loan based on your service history and duty status.
Is prequalification a first step in the VA loan process?
Yes, prequalification is the initial step in the VA loan process and is generally quite simple. It provides an estimate of how much you might be able to borrow based on the information you provide to the lender. You can think about loan prequalification as a “first interview” of sorts. Prequalification helps lenders achieve three main goals:
What are the eligibility requirements for a VA home loan?
The home must be for your own personal occupancy. The eligibility requirements to obtain a COE are listed below for Servicemembers and Veterans, spouses, and other eligible beneficiaries. VA home loans can be used to: * 90 days applies for wartime If you are now on active duty, eligibility can be established after 90 days of continuous active duty.