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An Expert Guide to VA Home Loans
By Aly J. Yale MONEY RESEARCH COLLECTIVE
VA mortgages can help military service members, veterans and their spouses achieve homeownership — and affordably. They require no down payment, have low interest rates and closing costs are limited, unlike other potential loan options out there.
Are you considering a VA loan for your home purchase or refinance? Here’s what you need to know.
Table of contents
- What is a VA home loan?
- Types of VA home loans
- The process to get a VA home loan
- Who qualifies for a VA home loan?
- What are VA home loan rates?
- What are the benefits of getting a VA home loan?
- Best VA home lenders
- VA home loan FAQs
- Summary of our guide to VA home loans
What is a VA home loan?
A VA loan is a type of mortgage issued by private lenders but guaranteed by the U.S. Department of Veterans Affairs. That guarantee essentially means that the federal government assumes part of the credit risk and will repay the lender if a VA borrower defaults on their loan.
Because of the VA’s guarantee, eligibility requirements for VA loans tend to be less stringent than other mortgage options. Borrowers don’t need a down payment, and loan amounts are unlimited for those who have full entitlement. There are also no hard-and-fast credit score requirements.
Types of VA home loans
There are three main VA loan types to choose from. The right choice really depends on your goals, mainly whether you are looking to buy a home or refinance your current loan. If you or your spouse is a Native American, there is also a fourth type of VA loan to consider.
Purchase loan
VA purchase loans are exactly what they sound like: mortgages designed for buying a house. These loans have no down payment requirement, no mortgage insurance, and certain closing costs are limited or can be passed onto the seller.
With a VA purchase loan, you can buy a:
- One- to four-unit single-family house (as long as one of the units is your primary residence)
- VA-approved condo
- Manufactured home
- New construction home
You can also use the loan to add energy-efficient features to your existing property or buy a home and fix it up (if it’s in need of repairs or improvements).
Native American Direct Loan (NADL) program
VA NADL loans are for Native American veterans or veterans with Native American spouses. Qualifying borrowers can use them to buy, build or improve a home located on federal trust land. There are also NADL refinance loans if you’re looking to change the terms or rate of an existing NADL mortgage.
NADL loans have the same benefits as other VA loans, so they don’t require a down payment or private mortgage insurance.
Interest Rate Reduction Refinance Loan (IRRRL)
IRRRLs (also called VA streamline refinances) are VA loans for existing homeowners looking to reduce their interest rate and monthly payments. You can also use a VA IRRRL to change from an adjustable-rate loan to a fixed-rate one, which can help keep your mortgage payments predictable.
To use the IRRRL program, you need to have an existing VA loan on your property. You also need to live in the home you’re refinancing.
Cash-out refinance loan
The VA cash-out refinance loan is another option for existing homeowners. With this type of loan, borrowers can take out a new VA loan that’s larger than their current mortgage and receive the difference between those two numbers in cash.
These loans can be a smart option if you need funds for home renovations or paying off high-interest debt, but they can be used for any purpose.
The process to get a VA home loan
Getting a VA loan is a little different than getting a conventional mortgage, as there’s an extra step involved: proving that you’re eligible for the VA loan benefit. Here’s what the VA loan process looks like from start to finish.
Find a VA lender
Only certain mortgage companies are approved to issue VA loans, so your first step is to find the one you’d like to work with. Some lenders specialize in VA mortgages, and many large banks and financial institutions offer them as well. See our section on best VA lenders for recommendations, or read our guide to the best VA loans for more options.
Get a Certificate of Eligibility (COE)
In order to get a VA loan, you’ll need a Certificate of Eligibility, which details your service record, your eligibility for the VA loan program, any fee exemptions you may qualify for and your total loan entitlement — which is how much the VA will guarantee on your behalf.
You’ll need to request your COE through the eBenefits portal at ebenefits.VA.gov. You can also request it by mail or have your lender request it on your behalf. This last option is often the fastest method, as lenders have an online system that streamlines the process. Whichever you choose, you will need to provide a copy of your discharge papers or a statement of service before the COE can be issued. More details on documentation can be found at VA.gov.
Get preapproved to get an estimate
The next step is to get preapproved for your VA loan. This requires filling out your lender’s application, agreeing to a credit check and submitting some financial documents.
These typically include:
- Pay stubs
- W-2s
- Tax returns
- Bank, savings and retirement account statements
- Any disability award letters
- Statements for any Reserves or National Guard points
Once the lender has all this information, it will analyze your income and determine what you can afford. It will then issue a preapproval letter, which will detail the estimated loan amount you’re eligible for and give you a good idea of what price range you should be shopping in.
Find a home and put in an offer
This next step is the fun part: the house hunt. You’ll hire a real estate agent, sign up for listing alerts and start touring properties until you find the right one.
When you do, work with your agent to put in an offer. Make sure to include your preapproval letter with any offers you submit. This can show sellers that you’re a good candidate for a loan (and that you won’t back out due to financing issues).
Underwriting and VA appraisal
If the seller accepts and you enter into a formal sales contract, you’ll send it to your VA lender to begin the underwriting process. This is when they double-check all your financial details and make sure you have the resources to cover your new mortgage payment.
The lender will also order a VA appraisal, which is when a third-party appraiser evaluates your chosen home to ensure it meets VA safety standards and is worth the money you’re asking to borrow for it. As long as the home’s value comes in at or above what you’ve offered on the home, you’ll be scheduled a closing date.
If it doesn’t, you will either need to make up the difference out of pocket or renegotiate with the seller. Depending on market conditions, they may be willing to lower the purchase price to keep the deal on the table.
Closing
Finally, it’s time to close on your loan. During your closing appointment, you’ll pay your closing costs, VA funding fee and down payment (if you’re making one) and sign all the paperwork. You could also opt to finance the funding fee by folding it into your loan amount and paying it off over time.
When the money has been transferred and all documents are signed, you’ll receive the keys to your new home (or the proceeds from your cash-out refinance).
Who qualifies for a VA home loan?
If you want to make sure you meet the VA loan requirements for 2022, the first place to start is your service record (or your spouse’s, if they’re the military member).
To qualify for a VA loan, you’ll need to have served a certain amount of days in the U.S. Armed Forces, National Guard or Reserves.
Here’s what current VA loan requirements look like for Armed Forces members and veterans:
| Service dates | Service requirement |
| Current / active duty service members | 90 continuous days |
| Aug. 2, 1990 – Present |
|
| Sept. 8, 1980 – Aug. 1, 1990 |
|
| Oct. 17, 1981 – Aug. 1, 1990 (as an officer) |
|
| May 8, 1975 – Sept. 7, 1980 |
|
| May 8, 1975 – Oct. 16, 1981 (as an officer) |
|
| Aug. 5, 1964 – May 7, 1975 |
|
| Nov. 1, 1955 – May 7, 1975 (in the Republic of Vietnam) |
|
| Feb. 1, 1955 – Aug. 4, 1964 |
|
| June 27, 1950 – Jan. 31, 1955 |
|
| July 26, 1947 – June 26, 1950 |
|
| Sept. 16, 1940 – July 25, 1947 |
|
The requirements for National Guard members are as follows:
| Service dates | Service requirement |
| Aug. 2, 1990 – Present | 90 total days of active duty |
| Aug. 1, 1990 or earlier |
|
And, lastly, here are the requirements for Reservists:
| Service dates | Service requirement |
| Aug. 2, 1990 – Present | 90 total days of active duty |
| Aug. 1, 1990 or earlier |
|
Surviving spouses may also be eligible for VA loans if their spouse is missing in action, being held as a prisoner of war or died while in service or due to a service-related disability.
Beyond the military service requirements, you will also need to have a debt-to-income ratio (DTI) of 41% or less. Exceptions may be allowed in some cases, but this is the general rule set by the VA.
Your credit history and credit score will also factor in, though the VA doesn’t have established minimums for this. The minimum credit score requirement will depend on your lender, but you’ll generally need at least a 620 score to qualify.
Finally, there are also minimum property requirements for VA loans. First, the VA loan can only be used on a home you plan to use as your primary residence. Additionally, there are minimum property standards the home must meet. These dictate the condition the home must be and ensure it is a “safe, structurally sound and sanitary” property for the service member to live in.
The VA has a full guide to these requirements if you want to learn more. If you opt for a VA mortgage for your home purchase, your lender will send out a VA appraiser to make sure the property meets all required standards.
What are VA home loan rates?
VA mortgage rates tend to be lower than many other mortgage options, including FHA and conventional loans. This is because the VA’s guarantee lessens the risk of these loans for lenders.
| VA mortgage home loan rates 2022 | |
| Interest rate |
|
| APR |
|
*Rates gathered 10/13/22
What are the benefits of getting a VA home loan?
VA loans come with lots of benefits — especially compared to other types of mortgage loans. The biggest is that they require no down payment.
Here’s a look at the full list of VA home loan benefits that borrowers enjoy
- No down payment. This can considerably lower the upfront cost of buying a home.
- Limited closing costs. The VA has limits on what borrowers can be charged for on origination and other lender fees. It also allows homebuyers to pass many of their closing costs onto the seller (if they agree to, of course).
- No mortgage insurance. Both FHA loans and conventional loans require mortgage insurance, which adds an extra cost to your monthly payments. VA loans do not require mortgage insurance.
- Low interest rates. Thanks to the VA’s guarantee, VA mortgages tend to have some of the lowest interest rates around, especially compared to conventional mortgage loans.
- No credit score requirement. The VA doesn’t have a hard-and-fast credit score minimum. Individual lenders may impose one, though, so be sure to shop around if you’re worried about qualifying.
Another perk of VA loans is that veterans and military members enjoy them for life. The benefit can be used over and over again (and can sometimes have two loans at once).
Best VA loan lenders
| Rocket Mortgage | New American Funding | LendingTree | |
| Highlights |
|
|
|
| Loan options | 30-year fixed, 15-year fixed, jumbo | 30-year fixed | 30-year fixed, 15-year fixed, 30-year 5/1 adjustable |
| Interest rate | Starting at 5.75% on 15-year loans | Starting at 6.125% on 30-year loans | Starting at 5.38% on 30-year loans |
*Rates gathered 10/13/22
VA home loan FAQs
What are the limits of a VA home loan?
How difficult is it to obtain a VA home loan in 2022?
Getting a VA mortgage isn't difficult, but there is a certain process you need to follow — and you'll need to work with an approved lender. The most important thing is that you or your spouse meet the military service requirements and that you produce a Certificate of Eligibility to prove it.
What does a VA home loan cover?
A VA loan can cover a home purchase, buying a home and repairing it, installing energy-efficient upgrades on a property, building a home or refinancing an existing mortgage. They can be used on VA-approved condos, one- to four-unit single-family homes (if you live in one of the units), new home builds and manufactured homes.
Can you have two VA home loans?
Yes, you can have two VA home loans at once. This is common when a military member receives a permanent change of station (PCS). In this case, they may retain their existing home and then use their remaining VA loan benefit to purchase another property at their new station.
Having an existing VA loan will impact how much you're eligible to borrow, though. Your lender will use your loan entitlement, credit and existing mortgage balance to determine your second loan amount.
Is it better to do a VA loan or a conventional loan?
VA loans have lots of benefits, so if you're eligible for one, that's usually a better choice than a conventional loan. Not only will your interest rate be lower, but you won't have to put money down and your closing costs will be limited. There is also no mortgage insurance requirement with VA loans.
To learn more about the differences between these two mortgage programs, see our guide to VA loan vs. conventional loans.
Summary of our guide to VA home loans
VA loans offer many benefits for military members, veterans and their families. If you’re hoping to use one to purchase or refinance a home, review the VA loan eligibility requirements and start researching VA-approved lenders. You can also request your Certificate of Eligibility (COE) to get the ball rolling or read our guide to VA loan refinance or more guidance.
