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Navigating VA loan qualifications can feel like a maze, but it doesn’t have to be.
The VA loan, backed by the U.S. Department of Veterans Affairs, offers unique benefits for veterans and active military personnel seeking homeownership.
This guide will be your roadmap to understanding VA loan qualifications and leveraging your well-deserved benefits to secure an affordable home.
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- Lend in all 50 states
- Veteran lending specialist available to you, no matter where you are
- In-house processing and underwriting
- Express Loan Approval program, which allows you to be done with the whole process (minus the contract and appraisal), so you can focus on finding your home.
- Rate Protect (Lock & Shop) lock in your rate before you even find a home!
VA Loan Overview
VA loans are a type of mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). They are designed to help veterans, active-duty service members, and eligible surviving spouses become homeowners.
One key feature of VA loans is that they do not require a down payment or private mortgage insurance (PMI).
Qualifying for a VA Home Loan
To qualify for a VA loan, you must meet one or more of the following criteria:
- Served 90 consecutive days of active service during wartime.
- Served 181 days of active service during peacetime.
- Have more than 6 years of service in the National Guard or Reserves.
Certificate of eligibility (COE)
A Certificate of Eligibility (COE) is required to prove to lenders that you qualify for a VA loan. You can obtain a COE through the VA’s eBenefits portal, by mail, or through your lender.
Spousal eligibility
Surviving spouses of veterans may also be eligible for VA loans.
To qualify, the spouse must be unmarried, and the veteran must have died in service or from a service-related disability.
Benefits of VA Loans
VA loans offer a range of significant benefits designed to make homeownership more accessible and affordable.
- No downpayment: One of the most significant benefits of VA loans is that they do not require a down payment.
- Competitive interest rates: VA loans typically offer lower rates than conventional loans. This is because the VA guarantees a portion of the loan, reducing the risk for lenders.
- No private mortgage insurance (PMI): Unlike conventional loans, VA loans do not require borrowers to pay for private mortgage insurance (PMI). This can save borrowers hundreds of dollars each month.
- Flexible credit requirements: VA loans often have more flexible credit requirements than conventional loans, making them accessible to borrowers with less-than-perfect credit.
Types of VA Loans
The VA loan program offers several types of loans to cater to the diverse needs of veterans and service members.
- Purchase loans: VA purchase loans can be used to buy a new or existing home. They offer competitive rates and do not require a down payment.
- Cash-out refinance loans: VA cash-out refinance loans allow homeowners to take cash out of their home equity to pay off debt, fund education, or make home improvements. This type of loan replaces your existing mortgage with a new VA loan.
- Interest rate reduction refinance loan (IRRRL): Also known as a VA streamline refinance loan, the IRRRL helps borrowers reduce their interest rate by refinancing their existing VA loan.
- Native American direct loan (NADL): The NADL program helps Native American veterans purchase, construct, or improve homes on federal trust land.
VA Loan Limits
VA loan limits refer to the maximum amount the VA will guarantee without requiring a down payment.
These limits vary by county and are influenced by the conforming loan limits set by the Federal Housing Finance Agency (FHFA).
The VA loan limits are determined based on the median home price in your area. Current limits for your county can be found on the VA’s website.
Breaking Down VA Loan Entitlement
- Basic entitlement: VA loan entitlement is the amount the VA will guarantee on your behalf. The basic entitlement is $36,000, but most lenders will lend up to four times that amount ($144,000) without a down payment.
- Bonus entitlement: The VA provides a bonus entitlement in high-cost areas to help cover the higher home prices. This allows eligible borrowers to purchase homes exceeding the basic entitlement limits without a down payment.
How entitlement works
Your entitlement measures how much the VA will guarantee on your behalf.
If you have full entitlement, you can purchase a home with no down payment up to the conforming loan limit for your area.
Steps to Apply for a VA Loan
- Pre-Approval: Pre-approval involves reviewing your credit history, income, and assets to determine your borrowing limit.
- Finding a VA-Approved Lender: Not all lenders offer VA loans. Finding a lender experienced with VA loans is important to guide you through the process.
- Submitting a Loan Application: This includes providing financial documents, such as pay stubs, tax returns, and bank statements.
- Underwriting and Approval: After you submit your application, the lender will underwrite the loan, verify your financial information, and ensure the property meets the VA’s requirements.
VA Loan Fees
Part of qualifying for a VA home loan is paying the necessary fees.
The VA funding fee is a one-time fee paid to the VA to help cover the costs of the loan program. The fee varies based on the loan type, down payment amount, and whether you’ve used a VA loan.
In addition to the funding fee, you may need to pay other costs, such as closing, appraisal, and credit report fees.
How to reduce or waive fees
Some veterans, such as those receiving VA disability compensation, may be exempt from paying the funding fee.
Additionally, making a down payment can reduce the funding fee amount.
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Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
