Illinois VA Home Loan: Illinois VA Loan Requirements & Guidelines

Illinois VA Loan

VA Home Loan in Illinois

Among the various benefits offered to our men and women who have served in the military, the VA mortgage is a real gem. The VA loan is a mortgage program that has empowered thousands of residents in the state of Illinois with the ability to buy a home and secure a place in their respective communities.

Specific Veteran Benefits

There are a handful of benefits that come with the VA-guaranteed loan that distinguishes it from other types of home loans.

No Down Payment Requirement

There are a lot of excellent programs available to help Illinois residents purchase a home with a small down payment. However, the VA home loan does not require any down payment for qualified borrowers.

This one major feature can help you purchase a home in Illinois and potentially save thousands of dollars when compared to the 3% to 5% down payment requirement of other types of loans.

No Private Mortgage Insurance

Most loans that allow home buyers to purchase a home with a down payment of less than 20% of the asking price will charge a monthly premium known as Private Mortgage Insurance or PMI. This premium is designed to protect the lender in case the homeowner is not able to make all the payments on the home loan.

In contrast, the VA home loan does not ask VA home buyers to pay PMI. When combined with the no down payment feature, it is clear that qualified veterans can save a lot of money using the VA loan option to purchase a home.

However, there is a funding fee that the VA charges which is 2.3% the first time and a little higher at 3.6% for subsequent uses. This fee can be added to the loan amount and in some circumstances, certain veterans could be exempt from paying it.

Less Expensive Closing Cost

It is an understatement to say that there are a lot of documents involved in buying a home. For example, here are some of the service providers and their roles in the home loan:

  • Mortgage lender – helps home buyers complete the application
  • Appraiser – reviews the home and provides a market-based price report
  • Home insurance agent – provides an insurance binder to cover the home
  • Title insurance agent – reviews the title & deed of the home and provides a report
  • Real estate agent – helps the borrower complete a formal contract to buy the home
  • Closing agent – assembles all the documents for signatures

This is only a partial list of the various people involved in a mortgage. To aid the veteran, the federal government places a cap on the amount of each item that can be charged.

How To Get A VA Loan in Illinois: Eligibility

Each kind of home loan has a set of guidelines that determine who can qualify for the loan. The Veteran’s Administration oversees these guidelines, but it does not lend money directly to the borrowers. Instead, it approves banks, credit unions, and mortgage brokers to offer the VA home loan.

Listed below are descriptions of the basic guidelines for the loan.

Service Requirements

The Veteran’s Administration has differing requirements for the length of service based on wartime or peacetime. In addition, people who have served in the Reserves and/or National Guard may be eligible for a VA home loan. Here is a brief breakdown of the service requirements.

  • Must have served at least 90 consecutive days during a declared war
  • Must have served at least 181 consecutive days during peacetime
  • Must have served at least 2,548 consecutive days (6 years) either with the Reserves or National Guard
  • If your spouse died during the time of their military service, you may be eligible as a surviving spouse

Once you have determined that you have met the service requirement you may take the form DD-214 to a lender of your choice. The lender will use that form and apply online for your Certificate of Eligibility.

Picking an Eligible Property

The VA home loan will allow qualified buyers to purchase the following kinds of properties

  • A single condominium unit if the unit is part of a VA-approved complex
  • A single-family home often called a stick-built home
  • Multi-unit property. This can be a duplex or even a 4-plex. The main requirement is that the qualifying buyer must live in one of the units as their primary residence.

Any type of property that is zoned as commercial is not allowed for the VA home loan. Investment or rental properties are also not allowed.

Documenting Your Household Income

One of the main document requirements of the VA loan is proving your annual income. Generally speaking, people use one of the following methods to document their income.

  • For people that own a business, you will be asked to provide the last 2 year’s business tax returns as well as the last 2 year’s private tax returns. You may also be asked for a current cash flow statement
  • For people who do not own a business, the most recent pay stubs documenting your income from the last 60 days, along with the last 2 years’ w-2 forms should be sufficient.
  • If your income comes from some other type of sources, such as disability payments or investment income, you will need to document your income by providing bank statements showing where the money is coming from for the last 2 years as well as personal tax returns.

Residual Income Guideline

The VA loan has enjoyed some of the lowest foreclosure rates since its inception primarily for one reason; the residual income rule. This rule was put in place to ensure that the veteran would have money left over each month to cover not only necessities but also a few luxuries from time to time.

The amount of residual income necessary to get approved will depend on the yearly income for all buyers, the amount of monthly debt payments, and the number of people living in the home.

Less Than Perfect Credit Standards

The  VA loan program is known for approving buyers with less-than-perfect credit scores. So long as the homebuyer has made all of their debt payments on time for the past 12 to 24 months, they stand a good chance of getting approved for the loan. If you have time before your VA purchase, improving your credit is something to consider.

Picking A VA Rate

Most loans come in different varieties and the VA loan is no exception. Each one has advantages that will pertain to certain circumstances.

Fixed Interest

The fixed-interest loan is the exact opposite of the ARM. The rate that is used when the loan is closed will never change during the life of the loan. People who intend to remain at one location for many years are usually the best candidates for a 30-year fixed-rate loan.

You can use our speedy payment calculator to estimate your monthly payment.


As the name implies, the hybrid is a mix of two loan types. It is usually described as a fixed-rate ARM (ARM is an acronym for Adjustable Rate Mortgage). This means that the first portion of the loan will use a fixed interest rate while the remainder of the loan will have an adjustable rate.

For example, a 5-year ARM would have a fixed interest rate for the first 5 years of the loan. At the end of the 5 years, the rate would adjust each year until the end of the loan term. Most adjustable-rate loans have a ceiling for how much the rate can change per year and how much the rate can change over the life of the loan.

VA Mortgage Refinance

Regardless of credit, income, or location, getting a loan can take some time. Recent reports show that from pre-qualification to actual closing, it can take as long as 30 days to get a loan.

For this reason, the VA program has a streamline refinance option. It is a great way to get a lower interest rate without the typical paperwork and time involved in a usual VA loan.

Basics of the VA Refinance

The VA refinance is officially called the Interest Rate Reduction Refinance Loan. Many people in the industry refer to it by the initials IRRRL. To qualify for a VA IRRRL, the customer must meet these requirements:

  • Must have an existing VA loan. The program is not available for other types of home loans.
  • Must be on time for the most recent loan payment.
  • The last 12 loan payments must be on-time payments. No late payments are allowed.

What is NOT always needed for the IRRRL

  • Income documents
  • COE, (also called the Certificate of Eligibility)
  • High Credit Scores
  • New VA appraisal

The focus of the VA IRRRL is to help existing veterans lower the rate on their current loan. Therefore, it is not necessary to prove their income, determine the value of the home, or perform a credit check. Even if the home’s current market value is below the loan balance, qualifying veterans can still apply for an IRRRL.

You cannot cash out refinance with this program.

2nd-Tier VA Loan Entitlement

As previously mentioned, it is not allowed by the VA loan guidelines for one eligible borrower to have more than one VA loan at a time. But, like most rules, there are two small exceptions. The VA 2nd-tier Mortgage can be used in the following circumstances:

Relocating to Another Base

Illinois residents who have experience in the military know that it is common to get transferred around from base to base. In a situation in which a person has already used their COE to purchase a home near one base, they may keep that home and rent it out. They could then buy another home at the new location using the VA loan.

It is important to note that qualified veterans are limited to the purchase price of a home by their eligibility certification. Since they will have one home using part of their full entitlement, you can see where the 2nd home’s price would be limited since the overall eligibility is reduced.

In this situation, it is best to speak with a mortgage lender and find out the maximum amount to which you can qualify for the 2nd home.

Purchasing a House From Beyond a Foreclosure

If a qualifying Illinois veteran does not use all of their eligibility when they buy their home, it is possible to have a remainder of eligibility that can be used after a person has a home foreclosed.

Here is a walkthrough of one example.

Suppose a veteran previously purchased a home that used $41,000 of their total eligibility. Suppose that within the area the maximum loan amount is $424,100

In this scenario, the initial loan guaranty is $106,025 ( $424,100 x 0.25 = $106,025)

Initial guaranty, less amount used, equals $65,025 ( $106,025 – $41,000 = $65,025)

Therefore, the veteran may qualify for a $260,100 home loan without the need for a down payment ( 4 x $65,025 = $260,100)

Summing Up The Illinois VA Loan

Illinois residents who have served on active duty or in the reserves should contact a mortgage lender and ask about the VA loan as they are preparing to purchase a home. The ability to do a purchase loan in IL without the requirement for a large down payment, and the forgiving credit requirements, make it a great way to obtain homeownership status.

Important Disclosure

VA loans are only available to eligible veterans and service members and/or their spouse. is not acting on behalf of or at the discretion of the Department of Veteran Affairs or the Federal Government.

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