In order to apply for a VA loan you will need a Certificate of Eligibility, or COE for short.
There are different steps required to receive a Certificate of Eligibility depending on your personal situation and branch of the military.
NOTE: You will need your DD214 Discharge papers no matter what route you take below. An honorable discharge and completion of your tour of duty are typically required in all cases. This will determine if you are eligible for this benefit, you will need to contact a VA lender to determine if you qualify.
Group 1: Veterans, Activity Duty, Reservists and National Guard Members Who Been on Active Duty
If you belong to one of the above categories then you have three different ways that you can receive a COE:
- Apply Through Mail: Fill out VA Form 26-1880, which you can find on va.gov, the official VA website. You can then mail it to the address that is listed on the form.
- Apply Through A Lender: Your lender may be able to acquire your COE for you online; if so, the process typically only takes a few minutes. Be sure to speak to your lender beforehand to determine whether or not this is an option.
- Apply Online: Visit the Veterans Information Portal at http://www.ebenefits.va.gov to request the certificate.
If for whatever reason you cannot print out Form 26-1880 you can contact the VA at 1-888-244-6711 and request a copy be mailed to you.
Group 2: Reservists and National Guard Members Who Have Not Been On Active Duty
Group 2 enjoys the same options as Group 1 above.
Group 3: Spouses of Veterans Who Either Passed Away During Service or As a Result of Service
Unlike the application options for Groups 1 and 2, you are required to mail your application.
If your spouse passed away during service, the process is relatively quick and straightforward. However, if your spouse passed away after service, the VA must first confirm that the death resulted from a disability connected to the service.
This process can take anywhere between 2 to 3 months depending on the current caseload of the VA.
To apply, download and fill out VA Form 26-1817, which you can find on http://www.va.gov, the official VA website. The address you should mail the form to is:
VA Loan Eligibility Center
PO Box 20729
Winston-Salem, NC 27120
Similar to above, if for whatever reason you cannot print out Form 26-1817, you can contact the VA at 1-888-244-6711 and request a copy be mailed to you.
Regardless of the category you personally fall into, you will have to provide some sort of evidence to prove you are eligible for a COE. The eligibility graph on the VA website (located at http://benefits.va.gov/homeloans/eligibility.asp) details exactly what kind of evidence will be required from you.
How much mortgage money can I qualify to borrow?
This is typically the number one question mortgage professionals are asked by new clients.
Of critical importance when considering mortgage financing: There is sometimes a difference between what a client ***can*** borrow and what they ***should*** borrow.
In other words, what makes for a comfortable long-term mortgage payment?
The Quick Answer:
If we’re simply considering the financial math, lenders will calculate your Debt-to-Income Ratio and generally allow for 28-31% of your gross income to be used for the new house payment with up to 43% of your gross income to be used for all consumer related debts combined.
Sample Mortgage Scenario:
Let’s use a gross monthly income of $3000 and a qualifying factor of 30% Debt-to-Income Ratio:
$3000 multiplied by .3 (30%) = $900 max monthly mortgage payment
“Ballparking” a Qualifying Loan Amount:
Simple step: We use a safe average of $7 per month in payment for every $1000 in purchase price so…
Step 1) $900 a month divided by $7 = $128.50
Step 2) $128.50 multiplied by 1000 = $128,500 loan amount.
Remember, these are average ratios and guidelines set by most lenders for common mortgage programs.
Keep in mind, while most consumer debts are listed on a credit report, there are some additional monthly liabilities that may contribute to the overall qualifying percentages as well.
Regardless of how your personal income and credit scenarios factor in, it is important to consider your overall budget when trying to determine how much of a mortgage you should qualify for.
Other items to consider in your monthly budget:
1. Confirm all debts are taken into account
2. Any private notes or family loans
3. Short-term expenses – medical, auto repairs, travel, emergencies
4. Plan on additional expenses for the home such as water, electric, maintenance, etc…
5. Keep a cushion for savings and financial planning