Definition of a VA Loan

By W D Adkins

The Veterans Administration (VA) provides home loans for eligible veterans that enable many to become homeowners who could not otherwise do so. VA loans trace their origin back to the original GI Bill of World War II, and they have helped millions of veterans to buy houses. The VA is flexible in its credit policies, but veterans do have to meet certain standards.

Any veteran or someone still in the Armed Services not dishonorably discharged and who has served at least 181 days (90 days in wartime) is eligible for a VA loan.

A FICO credit score of 580 is the standard the VA sets for home loans. However, this is flexible, and they take extenuating circumstances into consideration.

If a veteran has no credit history, alternatives such as rent and utility bill payments are accepted. If credit problems stem from combat injuries, the credit score requirement is waived.

The size of a VA loan is limited. Total monthly payments on the loan, combined with all other debts, can total no more than 41 percent of income.

Bankruptcies or foreclosure don't disqualify veterans from receiving VA loans. However, a one- to two-year record of good use of credit is needed following a bankruptcy or foreclosure.

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