VA Loan Lender Requirements

What’s the difference between VA requirements and lender overlays?

There are 2 sets of rules to follow when qualifying for a VA home loan. There are the foundational VA requirements and then there are lender overlays. Each bank or lender is going to have their own set of requirements when determining who can get approved for a loan.

Since the VA is not lending the money, they have a very generic set of requirements. This gives banks and lenders the freedom to set their own overlays.

Let’s break this down:

The VA doesn't lend the money directly to the home buyer, banks or lenders do. The VA simply protects the lenders investment, i.e. your mortgage by guaranteeing or insuring the loan by 25% of the purchase price.

The VA has no credit score requirements. But as you can imagine it is difficult to get a loan with bad, or no credit established. This is why most banks and lenders are going to require the home buyer to have at least a 620 credit score.

The VA does not have any Debt-to-Income (DTI) requirements. Most banks and lenders are going to require a DTI ratio of 60% or less.

Up until January 1st, 2020 there was a limit on the size of home loan a veteran could get 100% financing for, known as the county loan limit. Today that rule no longer applies to veterans with full entitlement. This is where the “Jumbo Loan” comes in.

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Take Advantage of No Lender Overlays

Lender overlays are qualifications that some lenders and banks require that go above and beyond what the loan typically need. At MHS Lending, we follow the VA guidelines exactly as they are written and don’t have any lender overlays. This benefit allows us to help streamline the experience and get military members and veterans into their homes faster and easier.

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