"Yes... But" Vet Loans and Zero Down

The VA loan program was born in 1944 as part of the Servicemen's Readjustment Act—the GI Bill—a lifeline for returning World War II veterans to buy homes with no down payment, fair terms, and no closing costs. Over the decades, it expanded to include National Guard members, Reservists, and surviving spouses. Yes, the VA loan offers incredible benefits like zero down payment and no private mortgage insurance (PMI). But those perks don’t exist in a vacuum. They’re tied to something called entitlement—and your credit score and income play a bigger role than most veterans realize.

Eligibility: Who Qualifies for a VA Loan?

Before diving into entitlement, let’s clarify who can even access this benefit. You’re eligible if you fall into one of these categories:

• Veterans who served 90 consecutive days of active service during wartime or 181 days during peacetime.
• Active-duty service members with at least 90 days of continuous service.
• National Guard or Reserve members with 6+ years of service or those activated under federal orders for at least 90 days.
• Surviving spouses of veterans who died in service, from a service-connected disability, or who receive Dependency and Indemnity Compensation (DIC).

Yes, meeting these criteria makes you eligible. But eligibility alone doesn’t guarantee you can buy a home with zero down. That’s where entitlement, credit score, and income come into play.

Entitlement: The VA’s Guarantee (With Conditions)

Entitlement isn’t about how much you can borrow—it’s the VA’s guarantee to your lender. It’s the safety net that allows lenders to offer you a mortgage with no down payment and no PMI.

Every eligible veteran starts with a $36,000 basic entitlement. But that’s just the starting point. The real clout comes from bonus entitlement, staring for loans over $144,000 and allows the VA to guarantee up to 25% of the loan amount, depending on your county’s loan limit.

Here’s how it works in practice:

• If you’re buying a $400,000 home, the VA guarantees $100,000 (25% of $400,000) to your lender.
• Because the VA is guaranteeing a quarter of the loan, lenders will finance the remaining 75% without requiring a down payment from you—if your credit score and income meet their standards.

Yes, this is how you get a zero-down loan—if you’ve got full entitlement and your finances check out.

Full Entitlement: The Ideal Scenario (If Your Credit Cooperates)

If you’ve never used your VA loan benefit before, or you’ve restored your entitlement after paying off a previous VA loan, you’ve got full entitlement. This means you can borrow up to your county’s loan limit with no down payment—if your credit score and debt-to-income ratio meet the lender’s requirements.

DTI is your monthly total out divided by your gross income e.g., if your bills are $300 per month and your gross income is $1000 per month you DTI is 300/1000 or 33%.

Example: You’re buying a $400,000 home in a county where the loan limit is $806,500. With full entitlement, the VA guarantees $100,000 (25% of $400,000). The lender finances the remaining $300,000 with no down payment required from you—if your credit score is solid (typically 620 or higher) and your DTI is within limits (usually 41% or lower).

Yes, full entitlement gets you close to the finish line. But your credit and income determine whether you cross it.

Partial Entitlement: When Things Get Tricky (And Your Credit Matters More)

If you’ve used part of your VA loan benefit before—and you haven’t restored your entitlement—you’re working with partial entitlement. This affects how much you can borrow without a down payment, and it makes your credit score and income even more critical.

Example: You used $50,000 of your entitlement on a previous home purchase. Now, you’re looking to buy a $400,000 home. The VA would normally guarantee $100,000 (25% of $400,000), but since you’ve already used $50,000, you’ve only got $50,000 left in guaranty power. The lender will likely require you to:

1. Cover the $50,000 gap with a down payment, or
2. Structure the loan differently—if your credit score is strong enough (think 680+) and your DTI is low enough to offset the risk.

Yes, you can still buy the home, but you might need to put some money down—or lean on a stellar credit profile to convince the lender to take the risk.

The "Yes, But" of Credit Scores and Income

Here’s where many veterans get blindsided. Yes, entitlement is the backbone of your VA loan. But your credit score and income determine whether you can use it.

• Credit Score: Most VA lenders require a minimum score of 620, though some may go as low as 580 if the rest of your finances are strong. But if you’re working with partial entitlement or buying above the county limit, expect lenders to want higher scores (680+) to offset the risk.
• Debt-to-Income Ratio (DTI): Lenders typically cap DTI at 41%, though some may stretch to 45% or 50% if your credit is excellent. But if you’re pushing the limits of your entitlement, they’ll scrutinize your DTI even more closely.
• Income Stability: Lenders want to see steady, verifiable income. If you’re self-employed, recently changed jobs, or have irregular income, you’ll need to provide extra documentation—and possibly a higher credit score—to qualify.

Example: You’ve got full entitlement and want to buy a $300,000 home. If your credit score is 650 and your DTI is 38%, you’re in good shape. But if your credit score is 590 and your DTI is 45%, you might need to lower your home price, increase your income, or improve your credit before a lender will approve you—even with full entitlement.

The Bottom Line: Entitlement Is Just the Starting Point

Start with your COE, verify your loan limit, and—most importantly—get your finances in order. Talk to a VA-savvy lender who can help you navigate not just entitlement, but the credit and income requirements that come with it. If you’ve faced financial setbacks, don’t count yourself out. The VA loan is designed to help you bounce back—if you’re willing to put in the work.

Sources:

• VA Eligibility Requirements: www.va.gov/housing-assistance/home-loans/eligibility/
• VA Loan Limits by County: www.va.gov/housing-assistance/home-loans/loan-limits/
• VA Lender’s Handbook (Credit Underwriting): benefits.va.gov/warms/docs/admin26/m26-07/chapter_4_credit_underwriting.pdf
• VA Circular 26-24-10 (Restoration of Entitlement): www.benefits.va.gov/homeloans/documents/circulars/26_24_10.pdf
• VA Credit and Income Requirements: www.benefits.va.gov/homeloans/purchaseco_eligibility.asp

Bio:

America Foy is a real estate and development executive with 20+ years of experience bridging public and private sector initiatives. As Chief Real Estate & Development Officer at Where Ever Cogent., he specializes in asset optimization, strategic philanthropy, public-private partnerships, and complex transaction management. As former Real Property Agent for the City of Tracy, America designed municipal asset management systems, created risk mitigation solutions for dedicated land, and authored policy frameworks for regulatory compliance. His expertise spans portfolio strategy, risk mitigation, and stakeholder alignment, making him a trusted advisor for governments, investors, and developers. A CA Real Estate Broker, General Contractor, and Mortgage Broker, he delivers compliant and innovative solutions for any-scale real estate challenges.

Consulting Inquiries: america@whereever.net | (415) 559-3309