VA Loan Requirements in Colorado

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VA loans help veterans secure 100 percent financing with its flexible underwriting requirements. The fact that you are a veteran doesn’t entitle you to a loan; you must meet the guidelines set by the VA and the lenders themselves. After you confirm eligibility for the loan (you served adequate time and have the right type of discharge), you must determine if you qualify for VA financing.

Below are the basic requirements the VA requires for its loan program. I’m happy to work with you to see how you fit in with the guidelines, matching you with the perfect lender.

Overall VA Home Loan Requirements

• You must be an eligible veteran with at least 90 days of wartime service or 181 days of peacetime service according to the time you served
• You must have available entitlement (if you used your benefits before, you may need to restore them or make a down payment to make up the difference)
• You must occupy the property as your primary residence within a reasonable time
• You must prove you are a reasonable credit risk
• Your income must support the mortgage payments, homeownership costs, other monthly obligations, and the daily cost of living

Credit Score Requirements

Your credit score is the first impression lenders have of your financial responsibility. But, the VA’s guidelines don’t specify minimum credit score requirements. Most lenders have a minimum score they prefer, which in Colorado is a 620 credit score. I work with many lenders with varying requirements to help veterans secure the financing they need.

Even if you don’t have a 620 credit score, let’s talk. I may be able to find ways you can improve your credit and your chances to secure VA financing. I also work with a variety of lenders with different requirements. If you have other compensating factors that make up for the lower credit score, you may still qualify for VA financing.

Debt-to-Income Ratio Requirements

Just like your credit score, lenders look closely at your debt-to-income ratio or the measurement of your debts to your total income. Your DTI tells lenders how much of your income you already committed to obligations.

The VA prefers a 41 percent total debt-to-income ratio, but many lenders I work with allow higher DTIs if you have other decent qualifying factors, especially a good credit score and adequate monthly disposable income. If your DTI exceeds 41 percent, but you want to buy a home, look closely at your debts. Are there any you can eliminate (pay off) or pay down to decrease your debt-to-income ratio?

Disposable Income Requirements

The VA cares how much money you have left each month after paying your debts. This is unique to the VA loan. Your disposable income shows how well you can pay your basic living costs without sacrificing. Without adequate disposable income, your risk of default increases, which puts lenders at risk. The VA credits their low foreclosure rates to its focus on disposable income in combination with your total debt ratio.

VA Loan Appraisal Requirements

The home’s value plays an important role in the VA loan process. The appraisal tells lenders the home’s market value based on comparable sales in the area. Since the VA provides 100 percent financing, this is an important factor. They need to know the home is worth enough should they need to take possession of it and sell it to get their money back.

In addition to the property value, the VA appraiser ensures the property meets the VA’s guidelines, called the Minimum Property Requirements. These requirements ensure the home is in a stable and safe condition for veterans and cover the basics you would want in a home. If the appraiser finds major issues with the home, the lender may require certain repairs before approving the loan. This protects you and the lender from a bad investment that causes you financial distress and increases your default risk.

If a home’s appraised value is below your agreed-upon purchase price, there are a few options. First, you may ask for a Reconsideration of Value (another opinion on the appraisal). If that doesn’t work or isn’t an option and the value remains the same, you have two more options:

• Make up the difference between the appraised value and the purchase price in cash
• Cancel the sale.

VA Loan Inspection Requirements

Please note, the VA inspection differs from the VA appraisal and Colorado VA lenders don’t require an inspection. I suggest my clients pay for an inspection before we order the appraisal to determine the home’s condition before moving forward.

I have many years of experience working with VA borrowers and lenders. I know the requirements, which lenders have more flexible options and how to help veterans get the most of their benefits. Call me today to see how we can work together to help you achieve your homeownership dreams.

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