You’ve served your country proudly as a current or former member of the military. Now, you’re eager to purchase a home, perhaps to start or relocate your family.
Good news: You may be able to buy that home with 0% down and very little money upfront.
A VA home loan, backed by the U.S. Department of Veterans Affairs (VA), can put you on the fast track to owning a residence for much less money down than you’d pay with a traditional mortgage.
And here’s even more good news — it’s easy to apply. Read on to learn what’s involved and how to get started.
How to apply for a VA home loan
You can apply for a VA loan online, over the phone, or in person.
Today’s homebuyer has the advantage of choice: you decide when and how you apply.
Most lenders offer online applications where you answer a series of relatively simple questions. Sometimes, you can securely upload your supporting documents.
If you’d rather be guided through the application, lenders typically staff phone lines during off hours. In-person meetings are available as well, but typically happen during the day.
Applying for a VA loan is the opposite of intimidating. You’ll probably be surprised at how easy it is.
How long does it take to apply and what do I need?
The initial application process is quicker than you might think. In fact, you may be able to complete it in as little as 15 minutes.
The good news is that you don’t need a thing to start an application. The lender will ask you questions you likely already know the answers to.
But if you’d like to be more prepared, feel free to gather the necessary paperwork and documentation ahead of time.
You’ll eventually need your certificate of eligibility (COE), like the one pictured below, which the lender can pull for you in minutes. You can also request it from the VA.
Depending on your length and type of service, and whether you are a surviving spouse applying for a VA loan, you may need to submit forms DD-214 or 28-8937 to request your COE.
During the initial application stage, the online system or your loan officer might also ask for:
- Recent pay stubs
- Recent years of W2s or (if self-employed) tax returns
- Financial or bank statements
Your loan officer will also pull your credit when you apply. Although the VA does not set a minimum credit score requirement, lenders usually set their own guidelines.
But even if you have a low credit score, you may still qualify for a VA loan, so it’s always worth talking with a lender.
Do I apply directly with the VA?
The term “VA loan” can be a bit misleading, since the VA doesn’t actually lend you money.
Instead, it approves lenders to issue VA loans on its behalf, as long as they adhere to a set of guidelines.
This arrangement offers the best of both worlds: the speed of a private company and the backing of the U.S. government.
Lenders are eager for your business, and you are allowed to shop around for the right rate and service for you. And lenders can approve loans at more lenient terms due to backing by the VA.
Where do I find a VA lender?
You can apply for a VA home loan with lenders such as a mortgage company, bank, or credit union, as long as they are an approved VA lender.
Not sure whether a lender offers VA loans? Check their website — many lenders list the type of loan programs available through their company. If you don’t see VA loans listed, give them a call or contact their help desk.
It’s a smart move to shop around carefully from several different providers of VA home loans. Doing so can help you find the best financing package, including a competitive interest rate, comfortable loan terms, and reasonable closing costs and fees.
How do I know if a VA loan is the right choice?
You don’t have to use a VA loan if you’re a veteran or active-duty servicemember. And there may be good reasons not to, especially if you qualify for a conventional mortgage.
Among benefits of a VA loan are
- Zero down payment
- Lower rates than conventional loans
- No monthly mortgage insurance
- Lenient credit guidelines
But a conventional loan might be better if you have 20% down and great credit. That’s because VA loans come with a funding fee that’s typically 2.3% of the loan amount. You can roll it into the loan, but it’s still a cost. Conventional loans have no such fee, plus you may avoid providing some extra documentation like your DD-214, proof of childcare expenses, and more.
The VA loan homebuying process
The VA loan process is similar to what you’d experience with any other type of mortgage, with the exception of obtaining your CEO and a VA appraisal.
Here’s what to expect:
1. Request for your Certificate of Eligibility. Your lender will need this to verify that you qualify for the VA home loan benefit. You can request this before you apply, or your lender can pull it during the application process.
2. Get a preapproval letter from a VA lender. A prequalification letter tells you how much you may be able to borrow, and it gives sellers and real estate agents confidence that you’ll be able to make a solid offer on a house.
3. Hunt for a house. Explore properties within your budget and weigh factors that are important to you, including commute time, quality of the school district, and more.
4. Make an offer. Your real estate agent will help you write an offer once you find the right home. If possible, work with an agent who has experience with VA borrowers. Sellers are sometimes wary of VA offers because of stricter appraisal requirements. A seasoned agent can help you overcome those hurdles.
5. Schedule the inspection and appraisal. A VA-approved appraiser will survey the property to ensure it meets the VA’s minimum property requirements and to assess the home’s value. Lenders will not give you a VA loan for more than the home is worth, so they cannot move forward until the appraisal is complete. You’ll also want to schedule an inspection to check the property for flaws and issues that you want to have fixed before the sale is final. You can also negotiate the sale price if you agree to buy the home as-is and make the fixes yourself. If the appraiser finds any outstanding issues, however, they will need to be made before you can buy the home.
6. Close on the home. Your closing may be scheduled at an escrow office, title company, or attorney’s office, though it’s become common for closings to happen at coffee shops and even online. This is when you’ll sign your loan documents, but you’ll get your keys a couple days later, once your lender funds the loan.
|VA homebuying tip: Before you submit an offer on a house, make sure the sales contract includes a “VA escape clause” or “VA option clause.” This allows you to void the contract if the home doesn’t appraise for the sale price. |
You can also pay the difference out-of-pocket, but you’ll need the money on hand for closing.
Consider, too, whether you’ll be able to recoup those costs if you sell the home down the road. The market is red-hot today, but if the home’s value drops, you could end up paying more than it’s really worth.
Who qualifies for a VA loan?
VA loan eligibility is limited to servicemembers and their surviving spouses.
You may be eligible if you served during wartime or peacetime if you are:
- A veteran
- An active-duty servicemember
- A National Guard member
- A reservist
- A surviving spouse of a veteran who died during their service or of a service-related injury or disability, and you have not remarried
The VA also applies minimum service guidelines based on when you served.
- Must have served 90 days in wartime or 181 days in peacetime
- At least 24 months of military service if on active duty
- If no longer active, you must have served your full orders
- Six years if you are a member of the National Guard or Reserves
You may also be eligible for a VA loan if you have not met the minimum service guidelines but were discharged due to hardship, early out, reduction in force, certain medical conditions, a service-connected disability, or due to a government decision.
In addition to the service requirements, you must meet the VA’s, and your lender’s, financial and credit requirements.
The VA doesn’t require a minimum credit score, but many lenders prefer a score of 620 or above. Lenders may also look for a debt-to-income ratio (DTI) of 41% or less, based on VA guidelines. But they can be lenient on DTI if you have compensating factors, such as excellent credit or substantial assets or savings.
Here’s a snapshot of who is using VA home loans by service period or current status:
VA home loan refinance options
Already own a home but are seeking to refinance to capitalize on lower rates, pay off your home earlier, lower your monthly mortgage costs, or tap into your home’s equity? The good news is that the VA also allows you to refinance your home loan if you qualify.
A VA cash-out refinance loan allows you to replace your existing mortgage with a new one that may have better terms and allows you to take cash out of your home equity. You can use that cash however you choose — home improvement projects, debt consolidation, your child’s college tuition.
Before you apply for a cash-out refinance, however, know that it will extend your repayment period and you’ll have less equity in the home until you pay down the new loan. If you don’t have a major expense you need to cover, you may want to consider an interest rate reduction refinance loan (IRRRL) to lower your monthly payments and free up extra cash without using up your equity.
The VA requires that you live in the home while you are refinancing the loan.
Interest rate reduction refinance loans (IRRRL)
VA-backed interest rate reduction refinance loans enable homeowners to lower their monthly payments by getting a lower interest rate, or stabilize their payments by switching from an adjustable-rate mortgage (ARM) to a fixed-rate loan.
To be eligible, your current mortgage must be a VA home loan. Also, you must prove that you currently live in or previously lived in the home covered by the loan. Thankfully, applying and getting approved for an IRRRL is much simpler than purchasing a home because you don’t need to supply income or asset documentation.
Apply for a VA home loan FAQs
You can apply for a VA home loan with VA-approved lenders, banks, mortgage companies, or credit unions. Check the lender’s website or contact them directly if you’re not sure whether they offer VA loans.
There is no minimum credit score required, although your lender may have different requirements. Typically, lender minimums range from 580-620.
So long as you qualify by being a veteran, active-duty service member, National Guard member, reservist, or surviving spouse, and can demonstrate creditworthiness and ability to repay, it’s not difficult to obtain a VA loan.
Your home will fail a VA appraisal if it does not meet VA minimum property requirements. The home must have adequate heating and electrical systems, a roof in sound condition, and no pest or termite problems.
The home must be a residential property, and it cannot be located in an airport clear zone, special flood hazard area, or an area susceptible to soil or geological instability.
A VA loan offers more benefits to eligible borrowers than other types of mortgage loans. There is no down payment or mortgage insurance required, and no penalty for paying off your loan early. You may also be able to get a lower interest rate than you would with a non-VA loan.
Importantly, VA loans do not require private mortgage insurance (PMI) as you’ll find with a conventional loan if you put less than 20% down. The other government-backed loans, FHA and USDA, require an ongoing mortgage insurance premium (MIP) for most borrowers as well.
Some sellers prefer not to work with a VA loan borrower because the VA has stricter rules and appraisal guidelines, including minimum property requirements. A seller might worry that they’ll be obligated to make improvements to the home for the sale to close. An experienced real estate agent and VA lender can help you make a strong offer that addresses the seller’s concerns and increases the chances that they’ll accept it.
VA loans have stricter property and appraisal requirements that can make sellers reluctant to accept VA offers. You’ll be charged a funding fee for a VA loan, though you can roll it into the mortgage so you don’t have to put any money down upfront. The VA guidelines prohibit borrowers from using a VA loan to buy a vacation home or investment property.
It’s not that different than with any other loan.
The main difference is that it may be more difficult to get a seller to accept your offer. And if the home doesn’t meet the VA’s minimum property requirements, the lender may deny the loan unless you or the seller make those repairs before closing.
By default, you as the borrower are responsible for paying all closing costs related to your VA loan, including the VA funding fee. However, you can negotiate with the seller if they are willing to pay some of the closing costs. You can also roll the funding fee into the loan, and you may qualify for closing cost assistance by contacting your local housing authority or a non-profit.
A VA appraiser may judge that a home is worth less than the asking price — but that doesn’t mean they’re lowballing you just for the sake of it. Lenders cannot give VA loans for more than a property is worth, and they rely on the appraiser to give an accurate estimate of the value.
This is for your protection, too. If you pay far more than the actual value, and the value later drops, you’ll owe more than the house is worth — this is known as being “underwater” on your home.
Still, a low appraisal doesn’t mean you can’t buy the home. You can always pay the difference in cash before closing.
Your VA loan will require a VA-approved appraisal, but the home inspection is optional. It is strongly recommended that you hire a professional home inspector to evaluate the home and look for any defects before buying.
What kind of homes qualify for a VA loan?
A VA loan can be used to purchase:
- Single-family home
- Condo or townhome in a VA-approved community
- Manufactured home on a permanent foundation
- A farm property that includes a primary residence, provided it is not an income-producing farm
- Multi-family home in which at least one unit is used as the primary residence
- New construction home
Not all lenders will approve VA loans for new construction, so if that’s important to you, double-check that the companies you’re considering offer that type of loan before you apply.
You cannot use a VA loan to buy an investment property or vacation home.
A VA loan sounds like the right fit for me. What’s next?
If a VA home loan checks all the boxes for you — and you check all the boxes for VA loan requirements — the next move is getting preapproved.
Prepapproval allows you to look for homes in your price range and establish a relationship with a lender, two of the biggest steps toward homeownership.
A down payment is required if the borrower does not have full VA entitlement or when the loan amount exceeds the VA county limits. VA loans subject to individual VA Entitlement amounts and eligibility, qualifying factors such as income and credit guidelines, and property limits. Fairway is not affiliated with any government agencies. These materials are not from VA, HUD or FHA, and were not approved by VA, HUD or FHA, or any other government agency.
VA Jumbo loans:VA loans must conform to secondary market requirements, which include the minimum 25% coverage requirement. Coverage is a combination of VA provided entitlement plus cash down payment or equity. VA loans subject to individual VA Entitlement amounts and eligibility, qualifying factors such as income and credit standards, and loan limits. Must present valid Certificate of Eligibility (COE) at time of application. Fairway is not affiliated with any government agencies. These materials are not from VA and were not approved by VA or any other government agency.