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If you have a service-connected disability, you’re eligible for a VA loan even if you served less than the minimum required time.
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VA loans are available to current service members and veterans who meet service and credit requirements.
Veterans with disabilities won’t have to pay the VA funding fee, and can use disability income to qualify for the mortgage.
Those with qualifying conditions may be eligible for VA grants that can help them make their home more accessible.
Many service members and veterans are aware of the homeownership benefits provided to them through the VA home loan program, including 0% down payments, competitive mortgage rates, and lower monthly payments thanks to no mortgage insurance requirement.
If you’re a veteran with a disability who meets the service requirements for a VA loan, you can also take advantage of this great program — and you might have access to some additional cost-saving benefits as well.
VA loans for veterans with disabilities
There’s no separate VA loan program for veterans with disabilities. Eligibility is based on minimum service requirements.
Typically, you’ll need to have served at least 90 days of active-duty service during wartime or 181 days during peacetime to be eligible for a VA loan. You may also be eligible with six creditable years in the National Guard or Selected Reserve.
However, if you have a service-connected disability, you’re still eligible even if you served less than the minimum requirements — even just a single day of service is sufficient to qualify you. A service-connected disability includes physical or mental conditions that developed as a result of or were made worse by your service in the military.
If you’re eligible for a VA loan, you or your lender will have to request your Certificate of Eligibility from the VA, which certifies that you meet eligibility requirements. You can request a COE through the VA eBenefits website.
VA loans are guaranteed by the US Department of Veterans Affairs, which enables lenders to offer mortgages with no required down payment, no monthly mortgage insurance, and some of the lowest rates available to borrowers.
How your disability rating impacts VA loan eligibility
Disability ratings are used by the VA to determine the level of monthly compensation a veteran receives for their service-connected condition. Ratings are given based on the severity of their condition.
Your disability rating from the VA won’t negatively impact your VA loan eligibility. Like we mentioned above, if you have a service-connected disability, you won’t be required to meet minimum service requirements to be eligible for a VA loan.
Your disability rating could indirectly impact your mortgage eligibility in a positive way if you receive compensation for your service-connected disability.
If you receive disability compensation from the VA, you can use that income when you apply for a mortgage. This can increase your approval odds and boost your buying power. The VA pays disability compensation to veterans who have at least a 10% disability rating.
Lenders look at your income to determine your debt-to-income ratio (DTI), which impacts how much house you can afford. The more income you can show, the more likely you’ll be approved. Those with low DTIs may also be able to get better rates.
What home loan benefits are available to veterans with disabilities?
In addition to being able to use disability income to help them qualify for a mortgage, veterans with service-connected disabilities have the benefit of not having to pay the VA funding fee.
The VA funding fee is a one-time fee that borrowers pay when they get a VA loan. When buying a home, VA loan borrowers will pay between 1.4% and 3.6% of the loan amount, depending on how much they put down and whether they’ve used the VA loan program before.
If you’re currently receiving or are eligible to receive VA disability compensation, you won’t have to pay the VA funding fee.
Your state’s Veterans Affairs department may also have programs specifically aimed at helping veterans achieve homeownership. The state might even offer things like property tax exemptions for veterans with disabilities.
You may also be eligible for one of the housing grants offered by the VA.
Disability housing grants for veterans
If you need to make changes to a home you’re purchasing to make it more accessible, the VA offers grants that can help you do this. If you’re awarded one of these grants, you won’t need to pay back the money you receive. You can apply for these grants on the eBenefits website.
Specially Adapted Housing grant
You may be eligible for a Specially Adapted Housing (SAH) grant if you own or will own the home you’re improving and you have a qualifying service-connected disability. With this grant, you could get up to $109,986 in 2023.
Conditions that qualify for an SAH grant include certain losses (or loss of use) of limbs, blindness in both eyes, or certain severe burns.
Special Home Adaptation grant
If you or a family member owns or will own the home you’re improving and you have a qualifying service-connected disability, you may be eligible for a Special Home Adaptation (SHA) grant. You can receive up to $22,036 in 2023 with an SHA grant.
Conditions that qualify for this grant include the loss or loss of use of both hands, certain severe burns, and certain respiratory injuries.
Temporary Residence Adaptation grant
If you’re temporarily living with a family member whose home needs to be adapted to meet your needs and you meet the qualifications for an SAH or SHA grant, you can apply for a Temporary Residence Adaptation (TRA) grant.
If you qualify for an SAH grant, you can get up to $44,299 in TRA assistance in 2023. If you qualify for an SHA grant, you can get up to $7,910 in assistance.
Home loans for veterans with disabilities who have bad credit
Meeting minimum service requirements isn’t the only thing you’ll need to qualify for a VA loan. VA loans are guaranteed by the VA, but they’re originated and serviced by private mortgage lenders. And each lender has its own requirements for who is eligible for a mortgage.
Many lenders require a credit score of at least 620 for a VA loan, which means veterans with poor credit might have a difficult time getting approved for a mortgage. But the VA doesn’t set a minimum credit score for the loans it guarantees, and some lenders allow lower scores, possibly down to 580 or lower. For example, Carrington Mortgage Services allows scores as low as 500 on its VA loans, while Freedom Mortgage accepts scores down to 550.
If you’re struggling to qualify for a mortgage due to your credit score, there are some things you can do to improve it, such as lowering your credit utilization ratio.