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With your dedication to serving your country, you deserve a home loan that also serves you well. VA loans are backed by the U.S. Department of Veterans Affairs, meaning the VA guarantees a portion of the loan you get from a lender.
The U.S. Department of Veterans Affairs backs VA loans so that we can provide you with a more affordable mortgage. Our home.com by Homefinity professionals want to help you use those VA benefits to transform a house into your affordable home, whether you’re purchasing a new home or refinancing a loan for your current home.
We’ve outlined the steps to help you understand VA benefits, whether you qualify, the financial requirements, and the options available for a home purchase or refinance, as well as how to secure the most affordable home loan for your situation.
Where to start before you apply
How does a VA loan work?
There are VA loan programs to help you buy, build, or renovate a house or condo, as well as to refinance your current mortgage. VA loans are backed by the U.S. Department of Veterans Affairs, meaning the VA guarantees a portion of the loan you get from a lender.
With this guarantee, there is less risk for the lender to give you a loan. With less risk, we can provide you with better terms for your mortgage, such as no down payment, no closing costs, and lower interest rates, even if you have a low income or credit score.
There are three VA-backed loans provided by lenders and a direct loan provided through the VA.
VA-backed loans include home purchase loans, which includes the Native American Direct Loan program for Native American veterans or their spouses. There are also VA-backed refinance options to reduce monthly payments with an interest rate reduction refinance loan or a cash-out refinance loan to borrow money from the value of your home.
To get approved for a VA-backed loan, you’ll need to meet qualifications established by the VA and financial requirements set by the lender.
Who qualifies for VA loans?
Those who are actively serving, have served, or certain military spouses can qualify for a VA loan.
Although there are exceptions and other approved circumstances, if you fit into one of the following basic situations, you could qualify for a VA loan.
- You’re active-duty military
- You’re a veteran who was honorably discharged
- You’re separated from military service in a situation other than dishonorable discharge
- You’ve served at least 90 consecutive days of active service during wartime or at least 181 consecutive days of active service during peacetime
- You’ve served at least 90 consecutive days of active duty or more than six years of honorable service in the National Guard or Selective Reserve.
- You’re a qualified surviving spouse of a deceased veteran
To get approval for a loan, you will need to fill out a VA Certificate of Eligibility (COE). This is not needed before applying for a loan but it will be required before you can get approval. We can help you apply for COE, you can apply online through the VA’s benefits portal, or by mail with VA Form 26-1880.
What are the financial requirements?
Your credit score
To qualify for a VA loan, credit score requirements can fluctuate, but typically we can find an appropriate loan program or help you to improve your score.
Using a free site like CreditKarma, CreditSesame, or CreditWise can be a quick way to get an idea of how you’re doing with your credit. But, just keep in mind that when you go to qualify for your mortgage we’ll need to request your actual credit report and score, which will give us “official” credit scores and the full details of your credit history.
Your income vs debt
When looking at your credit score and monthly budget, pay close attention to the amount of debt you carry compared to the amount of consistent income you earn. This determines your debt-to-income (DTI) ratio, which is your monthly expenses divided by your gross monthly income. If you have enough consistent income to pay the added cost of a mortgage, you are more likely to get approved. A DTI ratio of under 60% is commonly accepted for VA loans. To learn more about your DTI ratio and how it will effect your loan talk to one of our loan professionals.
Considerations of your DTI ratio coincide with your residual income, which is your monthly income remaining after all major debts and obligations are paid. Proving you have sustainable residual income is required for VA loans. This is meant to ensure you have enough funds to manage daily living expenses in addition to paying your home loan. Approved residual income amounts vary based on your family size and location.
VA Funding Fee
VA loans have more flexible requirements for both credit scores and DTI ratios than conventional loans. They also save you money by not requiring a down payment when closing on a home purchase loan.
However, there is a VA funding fee that will need to be covered. It can be rolled into your loan over time. There are also exceptions to having to pay the fee, such as if you have a service-connected disability, receive VA disability or have in the past, or you’re a surviving spouse who qualifies.
The fee for a purchase loan ranges from 1.4% to 3.6% of the loan balance, depending on your down payment and whether it’s your first VA loan. You’ll want to know how this fee could affect the cost of your loan at closing and over time.
A VA appraisal is required for the property that you’re wanting to finance. The appraisal provides an estimate of the value of the property compared to the price of comparable homes nearby.
The appraiser will also check that the property meets the VA’s Minimum Property Requirements, intended to ensure homes are safe and sound.
If there are issues with the value or condition of the home, you have the option to walk away from the property in a purchase situation, ask for a reconsideration of its value, or have the condition of the home fixed before the loan can close.
Do you qualify for other special programs?
If you find that you don’t qualify for a VA loan, you might be eligible for other assistance, as there are several special circumstances and government programs that can make your home more affordable. To learn more about whether you qualify talk to one of our loan professionals.
- If you need a low down-payment for the purchase of a home, an FHA loan might be the best fit
View our Find a Loan page to see if there is a better fit for your situation.
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What purchase or refinance options do you have with a VA loan?
Whether you’re a first-time or repeat homebuyer, or looking to refinance your existing mortgage, VA loans provide flexibility with benefits such as relaxed credit qualifying standards and lower interest rates than conventional loans.
VA loan requirements
- Credit score requirements can fluctuate, but we can typically find an appropriate loan program or assist you in improving your score
- VA Certificate of Eligibility
- Debt-to-income ratio of less than 60%
- Maintain residual income, or monthly income remaining after all major debts and obligations are paid
- The home is your primary residence
- VA appraisal to estimate the value of the property compared to the price of comparable homes
- Property’s condition meets VA’s Minimum Property Requirements
- Depending on location, typically for a loan no larger than $510,400 to $765,600 for a single-family home
When purchasing a home with a VA loan, they need to meet certain requirements to be approved by the VA. To help you find a home that meets these requirements, the Veterans Information Portal has a search tool for finding approved properties.
Features of a VA purchase loan
- Option for no down payment
- Option for no closing costs
- No monthly mortgage insurance payment
If you qualify for a VA loan, you’ll want to consider what options and benefits it provides compared to a conventional, FHA, or another type of loan.
Learn more about each loan type’s features and requirements:
Refinancing can make your existing mortgage more affordable or help you borrow money to fund other life goals. There are refinance options available for those who have existing VA loans and those who have other loan types, such as conventional or FHA.
Features of a VA refinance loan
- Borrow up to 90% of your home’s value
- No money of pocket closing cost option
- Pay off your home loan sooner
Interest Rate Reduction Refinance Loan (IRRRL)
The IRRRL is great for existing VA loan holders who want to save money on their monthly mortgage payment by securing a lower interest rate.
This type of refinancing involves less paperwork and little-to-no costs out of pocket. You can roll closing costs into your overall loan amount. Some loans can even be approved without an appraisal.
A cash-out refinance can help those with various types of home loans use their home’s equity to borrow money from the value of the home for home improvements, emergencies, paying off debt, and other life purposes.
This type of refinancing is available to any qualified veteran homeowner, regardless of their existing loan type.
How does home.com by Homefinity work with you?
Now that you have some background on how VA loans work and if you might benefit from the program, let’s find out what will work specifically for your situation. Homefinity’s experts work with you from start to finish to secure the loan you need.
- With a phone call to our loan professionals or a convenient online form, you can start the application process, where we’ll ask questions about your credit and finances to learn about your needs.
- Your information helps us make sound recommendations on what loan options will work best for you, including whether you qualify for a VA loan. We’ll discuss the options with you and any questions you have about your situation.
- Once you feel comfortable with choosing your loan, we’ll help you through the approval process. With approval, we can lock in your interest rate so it won’t fluctuate throughout the home-buying process.
- As you head toward closing your loan, we’ll guide you through every step, updating you at each point in the process with clear details and next steps. Your dedicated loan officer can answer your questions any time.
- When you’re ready, we can close your loan on the day, time, and place that works best for you.
Get Started. Make it home.
Connect with a dedicated loan officer to discuss your options for buying or refinancing a home using VA benefits. Apply online or over the phone to start the approval process so that you can feel comfortable with your loan in the home you love.