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VA Loan Guide: Requirements, How To Apply, and More

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Man kisses his soldier wife holding a baby in front of a home.

Caring for soldiers and their families is an American tradition dating back to Colonial times — one that the Department of Veterans Affairs continues by guaranteeing affordable mortgages for qualified veterans looking to buy a home.

VA loans offer generous benefits: no minimum down payment, and no private mortgage insurance. The credit and other financial requirements also are more lenient, making them an attractive option for eligible borrowers.

But who can get a VA loan? And how does one qualify? Learn more with this guide to VA loans:

What Is a VA Loan?

A VA loan is a mortgage issued by a private lender that is guaranteed by the Department of Veterans Affairs. The VA guarantee reduces the risk that lenders take on when issuing the loans, allowing them to offer more-favorable terms to eligible service members, veterans, or their spouses.

Otherwise, VA loans are similar to conventional home loans. The lender provides money for the borrower to purchase a home, and the homebuyer repays that amount plus interest following an amortized schedule. Closing costs also are comparable to that of conventional loans, and must be paid in cash.

But not every homebuyer — or veteran — qualifies, so taking advantage of these benefits requires learning the specifics involved in how to get a VA home loan.

VA loans vs. traditional home loans

VA loans differ in significant ways from most standard mortgages:

  • While a conventional mortgage can be used to buy any type of property, including vacation or income properties, a VA loan can be used only for the borrower’s primary residence.
  • The VA sets no minimum credit score requirement, but the private lenders who issue VA loans can set their own. For conventional loans, most lenders require a score of at least 620.
  • VA loans require no down payment, which is one of their most attractive features. With conventional loans, you must make a down payment of at least 3%. And if your down payment is less than 20% of the purchase price, lenders require you to pay for private mortgage insurance.

Read More: The Ultimate Guide to Different Types of Mortgages

While VA loans come with fewer costs, they aren’t free. The VA requires borrowers to pay an upfront funding fee that varies between 1.4% and 3.6% of the total loan amount. The rate is based on your down payment and whether you’ve ever had a VA loan. The fee can be paid at closing or added to your loan amount, increasing your monthly payment.

The VA allows buyers to ask for up to 4% of their loan in seller’s concessions, which are fees normally paid by the buyer that the seller pays for instead. Examples include prepaid taxes and insurance, extra points, and the VA funding fee.

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Who Can Get a VA Loan?

To qualify for a VA loan, borrowers need to have served in the military or be the surviving spouse of someone who served.

VA home loan benefits may be extended to active or discharged members of the U.S. Army, Navy, Air Force, Marine Corps, Coast Guard, and Space Force, or those who served as a commissioned officer with the Public Health Service, Environmental Science Services Administration, or National Oceanic and Atmospheric Administration. National Guard and Reserve members may also be eligible.

Obtaining a certificate of eligibility

To get a VA loan, borrowers need a certificate of eligibility from the Department of Veterans Affairs.

Veterans and service members on active duty must have anywhere from 90 days to 24 months of service, based on when they served. National Guard and Reserve members need to have anywhere from 90 days to six years of service. There are additional exceptions for those who don’t meet these minimums. Full details can be found at the VA’s page on applying for a certificate of eligibility.

Veterans’ spouses may qualify for a certificate of eligibility if the veteran:

  • Has been declared missing in action.
  • Has been declared a prisoner of war.
  • Died while in service or from a service-connected disability, and the spouse didn’t remarry.

Full eligibility details can be found at the VA’s page on home loan programs for surviving spouses.

VA loan disqualifications

Not everyone who has served in the military or is married to a veteran can qualify for a VA loan. The two principal ways that a veteran can be disqualified from getting a VA loan are:

  • Failing to meet minimum service requirements: All veterans must serve a minimum amount of time on active duty to obtain a certificate of eligibility. This minimum varies depending on when the veteran served, and the reason they were discharged.
  • Being dishonorably discharged: Veterans with a dishonorable discharge are unable to receive VA benefits, including a home loan backed by the VA.

There are several types of discharges from military service, some of which may pose an obstacle to getting a certificate of eligibility. Veterans may change their discharge status a couple of different ways.

One option is to apply for a discharge upgrade. You’ll fill out an application and submit it for review, and if it’s accepted, then you will be eligible for VA benefits.

Another option is to pursue a review of your character of discharge. The VA will examine your record to determine if your military service fits the definition of “honorable for VA purposes.” This process can take up to a year, and requires you to provide documentation and find people willing to advocate for your case.

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Types of VA Loans

The VA offers five home loan programs.

VA purchase loan

This is the VA’s primary home loan program. The loan can be used to build a new home; improve, renovate, or upgrade a home; buy a single-family home; buy a condominium in a VA-approved project; or buy a manufactured home or lot.

Cash-out refinance

A mortgage refinance replaces your current home loan with a new one, usually with better terms. You can refinance a non-VA loan into a VA-backed loan, or refinance a VA loan to borrow against your equity and pay for major expenses or consolidate high-interest debts.

Don’t Miss: 10 Questions To Ask Before Refinancing

Interest rate reduction refinance loan

This modifies your current VA loan with a reduced interest rate, lowering the monthly payment. Also known as a streamline refinance, this program can be used only to refinance a VA loan.

VA renovation and home improvement loan

These loans are used to repair or improve an existing property. You can take out one of these loans alongside a VA purchase loan, or for an existing property.

Native American Direct Loan

This program is unique in that it’s a loan directly from the VA, as opposed to a private loan that’s guaranteed by the VA. The NADL program allows borrowers to buy, build, or improve a home on trust lands, such as a Native American reservation. Borrowers must be Native American or married to someone who is Native American.

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Is a VA Loan Right for You?

If you qualify, the generous terms of a VA loan could make it easier to get a mortgage and buy a home. You may be asking yourself, why would a qualified buyer not get a VA loan? Let’s break down the key advantages, as well as possible drawbacks.

Advantages of VA loans

Here are some of the most notable benefits of getting a VA loan:

  • No down payment: This could be a big advantage over standard home loans if you’re struggling to save for a down payment.
  • No PMI: Private mortgage insurance typically is charged when borrowers put less than 20% down. VA loans don’t require PMI, regardless of the down payment amount.
  • No loan limits: Unlike other government-backed loans, eligible borrowers with full entitlement have no limit on how much they can borrow with a VA loan. Full entitlement refers to borrowers who have never taken out a VA loan, have paid off a VA loan and sold the property, or have otherwise repaid a VA loan in full. Keep in mind that individual lenders still will determine how much to lend to you.
  • Lower credit requirements: If you’ve filed for bankruptcy or gone through a foreclosure, you may qualify for a VA loan in as little as one or two years. The VA also has no credit score requirements, but the private lenders who extend the loans can set minimums.
  • No prepayment penalty: You can repay your VA mortgage early without incurring a fee. Many conventional loans come with prepayment penalties, meaning you’re charged a fee if you repay all or part of your loan early.

Disadvantages of VA loans

Here are some downsides to VA loans:

  • No investment properties: VA loans only can be used to buy a primary residence. A VA loan cannot be used to purchase an investment or vacation property.
  • No fixer-uppers: “The VA has strict standards regarding the condition of properties because its loans are meant to acquire primary residences for veterans,” says Julie Aragon, a real estate sales agent and mortgage loan originator at Arbor Financing Group in Santa Monica, California. You can use a VA loan to renovate a home, but buying a run-down home to flip is prohibited.
  • The VA funding fee: One charge specific to VA loans is the funding fee, which is a percentage of the total loan amount and determined by the size of your down payment. If it’s less than 5% of the loan, the funding fee is 2.3%. With a down payment of 10% or more, the fee drops to 1.4%. You can avoid paying the funding fee at all if you meet certain requirements, such as receiving VA compensation for a disability related to service.
  • Lender fees: Lenders may charge their own fees on top of the VA funding fee. Many lenders charge a flat fee, sometimes called a loan origination fee, of 1% of the loan amount.
  • Seller objections: Sellers are sometimes hesitant about accepting offers funded by VA loans. “The VA process is longer than (it is for) conventional loans, and the appraisals are very strict,” says Carolyn Riley, a real estate broker and founder of Carolyn Riley Realty in North Carolina. “Some sellers also have strong issues with the seller concessions rules. The VA allows the buyer to ask the seller to pay some of the cost associated with the loan. It can be a big turnoff for sellers.” 

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Applying For a VA Home Loan

The VA loan process consists of several steps.

1. Review your finances

The first step when preparing to buy a home is to thoroughly check and organize your finances.

Know your credit score

You’ll want to know what your credit history looks like, your credit score, and if there are any negative marks on your record — and address them all in turn.

Calculate your debt-to-income ratio

You’ll also want a better picture of your debt-to-income ratio. This is a percentage that’s calculated by adding up your monthly debt obligations and dividing the total by your gross monthly income. The VA sets no limit on DTI, but prefers one that’s no higher than 41%.

2. Get your certificate of eligibility

The certificate of eligibility shows lenders that you are eligible for a VA loan. It’s best to get your certificate of eligibility before you start shopping for a home and a lender.

3. Find a lender

Whether it’s a bank, credit union, or mortgage company, you’ll need to find a lender that offers VA loans. While there are many lenders that purport to do so, you should make sure that any lender you consider is VA-approved.

Next, you should find out how much experience the lender has with VA loans. A lender that regularly handles VA loans will have a greater understanding of the requirements and process than one that only deals with this type of loan occasionally.

4. Consider VA loan preapproval

Mortgage preapproval is an important step when you buy a home. Getting VA loan preapproval lets real estate agents and sellers know that you’re ready to buy, and it gives them an idea of how much you can afford. Many sellers and real estate agents won’t work with buyers who aren’t preapproved.

The VA loan preapproval process is largely the same as for conventional mortgages. Lenders check your credit history, credit score, employment history, income, debt-to-income ratio, assets, and liabilities. When lenders issue a preapproval letter, it usually has an expiration date of between 30 and 60 days.

5. Submit your mortgage application

Once you’ve found a home and settled on a lender, you will need to complete a mortgage application and submit documentation that shows you’re eligible for a VA loan.

Related: How Long Does It Take To Close On a House?

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VA Loan FAQ

Here are the answers to some frequently asked questions about VA loans.

How are VA loan rates determined?

Like traditional mortgage rates, interest rates for VA loans are set by lenders and based on numerous factors, including credit score, payment history, debt-to-income ratio, and market conditions.

Which type of VA loan do you need to purchase a house?

Of the different types of loans offered by the VA, the one used most often for buying a home is the VA purchase loan. The Native American Direct Loan also can be used to buy a house. The others are intended for remodeling, refinancing, or reducing a loan’s interest rate.

Can I get a certificate of eligibility for a VA loan?

So long as you didn’t receive a dishonorable discharge and you meet the minimum service requirements based on when you were on active duty, you should be able to get a certificate of eligibility.

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The Bottom Line on VA Loans

VA loans are a competitive mortgage option for homebuyers who qualify. While a borrower must have some kind of connection to the military — as a veteran, an active-duty service member, or a surviving spouse — VA loans may give borrowers who meet those requirements a better chance of being able to afford a home.

Jason Steele contributed to the reporting of this article.

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