Ed is standing by to answer all your VA loan questions! Request a Private Call with Ed
How to Qualify for a VA Loan
Written by Ed Andrews III on April 15th, 2020
If you think you might want to buy a home in the future, the time to start preparing is right now. So pay attention, I’m going to show you how to get a VA home loan.

1. Build a Budget

If you’re like most people you spend until your money is gone. Or if you’re a little more responsible you manage to live within your means, so there’s money left over when your next paycheck comes in. For many people buying a home means their monthly housing expenses is going to increase. So it’s important to know exactly what’s coming in and what’s going out.

Divide your expenses into categories (for example loans, credit cards, food, entertainment, etc). See where you can save money, and set new spending goals for yourself.

2. Get Debt Under Control

When you apply for a guaranteed VA loan, lenders are going to look at your debt to income ratio. This is a measurement of how much debt you have versus how much qualifying income you have coming in. 

Debts are financed obligations, not bills for monthly services (think about the things you pay interest on). ($1,500 Monthly Debts / $5,000 Gross Income = 30% Debt to Income Ratio). So for example if you make $5,000 a month and you have $1,500 in monthly debts, your debt to income ratio would be 30%. Because $1,500 is 30% of $5,000.

Here’s where things get interesting. The lender is going to include your proposed monthly mortgage payment with all your existing debts when calculating your debt to income ratio. Technically the VA prefers that your total debt to income ratio be under 41%. 

That being said I’ve closed loans for veterans with debt ratios well over 60%. But generally it’s because there were other positive factors surrounding their loan application that made them a favorable candidate for financing. If you want to give yourself the best chance of qualifying, try to work down your debt so your debt to income ratio will be in the 40s or lower.

3. Don’t Co-Sign for Other People’s Debt

I don’t care if it’s your mom. NO, NO, NO!! She should have gotten her shit together by now. Co-signing for other people’s cars (or any debt) is the quickest way to ruin your credit or blow your debt to income ratio up. I can’t count how many times I seen veterans unable to buy a home, because they opted to help a friend or family member who didn’t have their life together.

If you find that co-signing for someone else’s debt is absolutely unavoidable, I want you to bury that guilt you feel deep down inside you and still not do it. If that doesn’t work, the first thing I want you to do is make sure that the lender has you as a co-signor and not co-borrower. There is a difference, at it will report on credit differently. 

Auto finance guys are notorious for listing would be co-signors as co-borrowers (or even primary borrowers) in an attempt to get the best financing rate they can find. DO NOT DO THIS! If the rate is a little higher, so be it. Your little brother can pay the higher rate, it’s his fault we’re in this situation.

Second, make sure they make the payments directly to the lender out of their own personal account. Mortgage lenders will want you to provide proof that the payment is being made by another party out of their own funds. You’ll likely need 12 months of cancelled checks or 12 months of bank statements from the other party, to show that they make the payment and not you. 

This will not work if you just co-signed recently. Lenders want to see the other party make the payment for a year.

4. Be Credit Clean for 12 Months

Despite what some lenders may tell you, there is not a VA minimum credit score. So it’s very possible to get VA home loans with bad credit. If you have some credit challenges, you may still be able to participate in the program. 

The VA knows that some veterans may have made mistakes in the past. What the care about is seeing that you’ve turned the corner and rebounded from those setbacks. You do this by paying all of your bills on-time for a year, and not incurring any new late payments. 

This is less important if you have a strong credit score. Someone with a high score could have missed a payment on something last month, and they would still likely qualify. But if your score is less than desirable (below 620) this is crucial.

Pay your bills on-time for a year, and even if your score doesn’t rise above 620 you’ll still have a strong chance at being approved. The key is to not have any derogatory marks on your credit report for a 12 month period. In some instances, this includes collection accounts. So if you have outstanding collections, it may be time to call those entities and make arrangements to settle those debts.

5. Get Your Student Loans Out of Default

Understand that many student loans are federally subsidized. Therefore, if you default on a student loan you have in fact defaulted on a federal debt. This is not a good look, because the VA is a federally insured loan program.

You cannot get a federally insured/guaranteed loan if you are currently behind on a federal debt. There’s many lenders who will write VA home loans for bad credit borrowers, but none for veterans with defaulted student loans.

You’ll need to get those student loans back in good standing. Reach out to your student loan lender (or their collection department), and ask them about the opportunity to “rehabilitate” your loans. Often they have programs to help you bring the loans back into good standing.

Be forewarned though. This often will require payments to be made via automatic debit from your account. So go back to step one of this blog, and start a budget.

6. File Your Taxes

If you haven’t done this year’s taxes, and you filed for an extension you’ll be fine. Otherwise, you need to get your taxes filed. If you owe, you’ll need to pay your outstanding federal income taxes, or set up a payment arrangement.

Most lenders will want to see that you’ve made at least three payments on your IRS repayment agreement before allowing you to proceed with obtaining a mortgage.
If you’re currently self-employed lenders will want to see two years of tax filings for that business. So if it’s a business you’ve had less than two years, you may need to wait before trying to buy.

7. Have Time On the Job

If you just got out of the military you’ll need 12 months on the job, unless it’s related to what you did in the military or you’ve recently graduated from a college or institution preparing you to work in that field.

If you receive commission, bonus, or overtime income that you need to use in order to qualify you’ll need ideally two years on the job. If you have less than one year, it will be nearly impossible to qualify with your variable income. So if your base income isn’t enough, you’ll have to wait.

8. Build Up Your Savings

Even though VA doesn’t require a down payment, you’ll still need some money to buy a home. Lenders don’t want to see that you have to exhaust every penny you have in order to buy a home. So save up enough money to cover your out of pocket home purchase expenses, and still have a few bucks left over.

If you are currently living rent free you should be saving money every month. Lenders will be skeptical of your ability to repay a monthly mortgage payment if you currently don’t have any housing expenses, yet have been unable to save money.

The best thing to do whether or not you have housing expenses or not, is to do a mortgage payment test. Get an idea of what the approximate mortgage payment would be for the type of home you wish to buy. 

Subtract your current housing expenses from that amount and save the difference every month. If you find this difficult to do, you might need to lower your desired purchase price. This is an easy way to save money, and prepare yourself for the upcoming mortgage payment.

If you feel like you’ve already accomplished all or most of these things, you may be looking for information on how to apply for a VA loan. Simple click this link to be taken to the online application. I’ll have you pre-qualified and ready to go shopping in no time at all. 

You may be asking yourself how do I know what mortgage payment to use to figure out what my debt to income ratio will be, or to give myself a mortgage payment test. Well be sure to watch my video on “How to Calculate my VA Loan Payment”, where I give you specific instructions on doing just that.
All Your Information is Protected When You Sign Up
About VA Loans With Ed
VA Loans With Ed was created by a veteran for veterans. This is the premier source for veterans to learn everything they need to know about the VA loan, and get the most out of the benefit they earned.

About the Author:
Ed Andrews III

Ed Andrews III is a mortgage loan officer, and U.S. veteran of the Iraq & Afghanistan Wars. He is an expert on VA home loans, and dedicated to helping veterans achieve home-ownership.
Related Articles & Videos
Learn more about the VA home loan
If you have questions I'm here to answer. Schedule a call with me.
If you're ready to take the next step in becoming a homeowner this is where you start.
Share Us on Social


VA Loans With Ed - Nulli Secundus - NMLS #156853
Powered By: Cardinal Financial Company Limited Partnership
1600 W 7th St, Suite 401, Fort Worth, TX 76102 - (682) 429-3443 - ed@edandrewsiii.com

VA Loans With Ed - Copyright 2020 - All Rights Reserved