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Did You Know That These Factors Can Determine Your VA Home Loan Eligibility?

First, I hope everyone stayed safe from Hurricane Ian, and our prayers are with everyone affected by this. Earlier this week, I was in Key West and took a trip to the Moondog Café, which specializes in breakfast, lunch, and dinner and has a bakery! I'm happy I checked this place out because it did not disappoint!

I started things off with the seafood omelet with blackened shrimp, scallops, crab, tomato, and pesto sauce. This was an incredible dish to start things off. The blackened shrimp was delicious, and the flavors flowed together perfectly. I also got the bacon & creamy gruyere spread with caramelized onions. This was the perfect dip, and I was blown away by the flavor profiles on this one. It was so filling that 8 people could have had it; just a fantastic dip! I got the Cuban coffee; as I expected, it was off the charts! The Moondog Café is an excellent spot for any meal, and I would rate it an 8.3 on the FoodiePhil scale. The next time I'm in Key West, I will be coming back!

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In this week's newsletter, we will focus on VA loans! In previous newsletters, we have highlighted the benefits of utilizing a VA home loan. Still, today, we will discuss other factors that we receive many questions on regarding VA loans.

  1. Eligibility Requirements and Discharge
  2. Surviving Spouses
  3. Credit Score / Residual Income

1. Eligibility Requirements and Discharge

Contrary to popular belief, the government doesn't offer VA loans. Instead, private lenders like banks finance the loan while the VA provides a guarantee. As long as a Veteran meets the stipulated requirements, they'll be eligible for the loan. You must meet one or more of the following requirements to receive a VA loan. What are these requirements? 

    • Serve at least 90 consecutive active service days during wartime
    • Serve no less than 181 active service days during peacetime
    • Complete six service years in the Reserves or National Guard
    • Be a surviving spouse of a Veteran who died on duty
    • Be a surviving spouse of a Veteran who passed away due to a service-related disability

Some service members and Veterans also qualify for these loans without meeting the requirements above. In these instances, your discharge nature will determine whether or not you'll receive approval for the loan.

You might get approval if your discharge falls into any of these categories:

    • The government discharged you due to a hardship
    • Your release arose from a reduction in force
    • Your discharge was at the government's convenience
    • A service-related disability or medical condition resulted in the discharge
    • You had served at least 21 months of a 2-year enlistment before the discharge
 

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2. Surviving Spouses

The process of getting a COE for surviving spouses is not very different. Essentially, you'll need to clarify to your lender whether or not you receive Dependency and Indemnity Compensation. If you receive this compensation, fill out VA Form 26-1817. You'll also need a DD Form 214 that indicates the Veteran's separation paperwork. Surviving spouses who don't receive these compensation benefits apply for the COE using VA Form 21P-534EZ. They'll then submit these forms to the Lafayette County Pension Management Center. The VA will also require you to provide your marriage license copy, the Veteran's separation paperwork, and their death certificate. 

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3. Credit Score / Residual Income

Although the VA has no minimum credit score requirements, private lenders do. Most lenders only approve loans for borrowers with a 620 credit score. Lenders also consider borrowers' debt-to-income ratios (DTI) before approving the loan. Your DTI will highlight your purchasing power and indicate your ability to repay the loan quickly. Most lenders require qualified Veterans to have a residual income that should cater to their specific family needs. Enforcing this requirement helps lenders to meet their financial obligations consistently. Also, this requirement ensures that borrowers have an easier time handling financial emergencies.



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There are many factors to consider when getting into the home-buying process. It’s best to evaluate all options and to really make sure that now is the right time to buy a home. If you’re only focused on the purchase price and interest rate, you’re simply not ready to buy and need to evaluate more to make sure you are not wasting your own time. If you plan on expanding your family, do consider getting a home larger than you originally thought as it will pay dividends in the long run!

Got a question? Contact me today to chat with a financial advisor or discuss your next steps. 

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