The United States Department of Veterans Affairs (VA) provides a variety of benefits and services for eligible veterans and service members. One of the most popular VA benefits is the VA home loan program, which helps veterans purchase homes with little or no down payment. This article will provide an overview of VA home loans, eligibility requirements, the application process, and additional resources for learning more.
The VA home loan program offers eligible borrowers a mortgage loan wholly or partially guaranteed by the VA. This allows veterans and qualifying military members to buy a home with no down payment and avoid paying private mortgage insurance (PMI). VA home loans feature competitive interest rates and allow veterans to refinance existing mortgages into lower interest VA loans.
To determine if you may qualify for a VA home loan, visit the VA eligibility page or connect with a VA loan specialist. You can also call 1-800-827-1000 to speak with a VA representative.
For the latest news and updates about VA home loans and other benefits, check the VA newsroom.
Understanding VA Home Loans
What is a VA Loan?
A VA loan is a mortgage loan partially guaranteed by the U.S. Department of Veterans Affairs. VA home loans are available to eligible veterans, active duty service members, reservists, and certain surviving spouses. These government-backed loans allow borrowers to purchase a home with no down payment and no monthly mortgage insurance.
The VA loan guarantee means the government agrees to repay a specified percentage of the loan to the lender if the borrower defaults. This VA guarantee allows veterans and service members to qualify for competitive interest rates on mortgage loans from private lenders with less stringent credit score and down payment requirements.
How Does a VA Home Loan Work?
VA loans function similarly to conventional loans but with key advantages thanks to the VA loan guarantee. Borrowers work with private lenders and apply for financing to purchase or refinance a home. The lender reviews the application and issues a Loan Estimate detailing estimated loan costs.
Once approved, the lender requests a Certificate of Eligibility (COE) from the VA to confirm the borrower’s service record and eligibility. At closing, borrowers pay an upfront VA funding fee that goes directly to the VA. This fee varies from 1.4% – 3.6% of the loan amount based on factors like down payment and subsequent use of VA loan benefits.
After closing, the lender can submit a claim to the VA if the borrower defaults on the loan. The VA would then repay part of the outstanding loan balance, minimizing losses for the lender.
Types of VA Loans
There are several varieties of VA loans available based on the purpose and terms of the mortgage:
- VA Purchase Loans – For buying a home as a primary residence. Require no down payment or PMI.
- VA Cash-Out Refinance – For homeowners seeking to tap home equity or refinance an existing VA loan into a lower interest rate or payment.
- VA Streamline Refinance – A simplified refinance option to refinance an existing VA loan with limited documentation and no appraisal.
- VA Interest Rate Reduction Refinance (IRRRL) – Specifically for refinancing an existing VA loan into a lower interest rate to reduce monthly payments.
- VA Renovation Loan – Offers financing above the home purchase price to cover renovations and repairs to make the home livable.
VA Loan Benefits
VA loans offer many advantages over conventional mortgages:
- No Down Payment – VA loans require 0% down for first-time use. No private mortgage insurance (PMI) required.
- Lower Rates – VA loans often have lower interest rates versus conventional loans.
- No Prepayment Penalty – VA loans can be prepaid or refinanced without penalty.
- Relaxed Guidelines – VA has more flexible credit score, income, and debt-to-income requirements.
- Reusable Benefit – Borrowers can reuse VA loan eligibility to purchase another home or lower interest rate.
- Cash-Out Refinancing – VA loans permit cash-out refinancing up to 100% of the home’s appraised value.
- Streamline Refinancing – Quick and easy refinancing of existing VA loans with limited documentation.
How VA Loans Compare
Compared to conventional mortgages, VA loans offer huge advantages for eligible borrowers:
- Down Payment – VA requires 0% down payment versus 3-20% on conventional loans.
- Mortgage Insurance – No PMI required on VA loans versus required on conventional loans with less than 20% down.
- Interest Rates – VA loans often have lower interest rates by .5 to 1 point lower versus conventional mortgages.
- Closing Costs – VA loans allow seller concessions for closing costs versus limitations on conventional loans.
- Credit Scores – VA has no minimum credit score versus 620+ required on conventional loans. More flexible on bankruptcy and foreclosure waiting periods.
- Debt-to-Income Ratio – VA allows higher DTI ratios than conventional loans. VA looks at entire financial picture versus rigid DTI requirements.
- Loan Limits – VA has higher conforming loan limits in many areas versus conventional loans. This allows bigger loan amounts.
Eligibility for VA Loans
The VA home loan program has eligibility requirements based on length of service, service discharge status, and other factors. Here are some key details on VA loan eligibility:
Minimum Active-Duty Service Requirements
To qualify for a VA home loan, you must have served at least 90 consecutive days on active duty during wartime or 181+ days during peacetime. Generally, veterans who enlisted after September 7th, 1980 must have served at least 24 months to be eligible.
The active duty service requirement also applies to reservists who were activated and National Guard members with qualifying service. Veterans with service-connected disabilities may also qualify with reduced active duty requirements.
Can I Get a COE for a VA Direct or VA-Backed Home Loan?
Yes, if you meet basic VA loan eligibility requirements, you can request a Certificate of Eligibility (COE) to verify your service record and qualify for a VA direct or VA-backed home loan. Lenders will require the COE to approve a VA mortgage.
What If I Don’t Meet the Minimum Service Requirements?
Veterans or surviving spouses who don’t meet VA’s length of service requirements may still qualify for loan eligibility under certain circumstances, such as:
- Active duty servicemembers with at least 6 years of service and agreement to serve additional time to reach 90 days total active duty.
- National Guard/Reservists called to active duty but with less than 90 days continuous service.
- Veterans with less than 90 days service but discharged for service-connected disabilities.
- Surviving spouses of veterans who died on active duty or from service-connected disabilities.
Can I Get a COE as the Spouse of a Veteran?
Yes, surviving spouses of deceased veterans can apply for a COE based on their deceased partner’s prior eligibility. This requires:
- The veteran served on active duty and was not dishonorably discharged.
- Entitlement was not used previously.
- Surviving spouse has not remarried.
- Surviving spouse was married to the veteran before or during their military service.
Other VA Loan Eligibility Requirements
In addition to active duty requirements, borrowers must meet other guidelines to qualify for a VA home loan:
- Good credit history with no major derogatory credit events in recent years, such as bankruptcy or foreclosure.
- Sufficient and stable income to afford mortgage payments and other obligations.
- VA loans limited to primary residence – cannot be used to purchase vacation homes or investment properties.
- Full entitlement available – previously used entitlement needs to be restored before obtaining another VA loan.
- Prior VA loans must be paid in full before applying for another VA loan.
Application Process
Here is an overview of the typical application process for obtaining a VA mortgage loan:
How Do I Request a COE?
You can quickly request a Certificate of Eligibility in two ways:
- Online – Apply for a COE electronically using eBenefits portal. Get a downloadable COE usually within 1-2 business days.
- By Mail – Download VA Form 26-1880 and mail to your VA regional loan center. Takes 7-10 business days.
How to Apply for a VA Loan: 6 Steps
- Check your eligibility for a VA home loan and request your COE.
- Shop and get pre-approved with multiple lenders to compare loan terms and rates.
- Make an offer and enter into a purchase agreement on a home.
- Allow lender to order the appraisal and underwrite your VA loan application.
- Submit documentation – W2s, paystubs, bank statements to confirm your income and assets.
- Close on your new home once the lender approves your application!
How to Apply for a VA Home Loan
The VA loan application process is very similar to a conventional mortgage:
- Gather documents – W2s, paystubs, tax returns, debt and asset statements.
- Get pre-approved – Apply with lenders to get a pre-approval letter for your loan amount.
- Shop for homes within your budget and make an offer.
- Allow lender to appraise home and finalize loan approval.
- Send final documents – updated paystubs, homeowner’s insurance, etc.
- Review closing disclosure and sign loan documents.
- Close on your new home!
How to Get a VA Home Loan
Follow these key steps to obtain a VA mortgage loan:
- Confirm your eligibility – Get a COE and check your credit.
- Research lenders – Compare multiple lenders for the best VA loan terms and interest rates.
- Get pre-qualified – Submit documents for pre-approval on loan amount.
- House hunt! – Work with a real estate agent to find a home within your budget.
- Make an offer – Enter into a purchase agreement when you find the right home.
- Let lender finish approval – Lender will appraise home and finalize loan approval.
- Close on your VA loan! – Review terms, sign documents, and close.
Certificate of Eligibility (COE)
A Certificate of Eligibility (COE) is a document verifying you qualify for VA loan benefits. Here are key details about getting and using a COE:
What Is a Certificate of Eligibility (COE)?
A Certificate of Eligibility is an official document issued by the VA that confirms a borrower’s eligibility for a VA home loan based on their military service history.
A valid COE verifies length of service and discharge status. It also shows the amount of VA home loan entitlement available. Lenders require a COE before they will approve a mortgage using VA loan benefits.
Can I Get a COE in Any Other Situations?
You may request a Certificate of Eligibility in certain other cases even if you do not meet normal VA loan eligibility:
- Active duty with at least 6 years of service – Get a COE by agreeing to remain on active duty for a total of at least 90 days to reach eligibility.
- Surviving spouses trying to retain VA home loan eligibility – Can request a COE to show continuing entitlement to VA loan benefits.
- National Guard/Reservists called to active duty for less than 90 days – May qualify for COE and VA loan by submitting evidence of active duty service.
Can I Use a COE I Used Before?
In most cases, you cannot reuse a Certificate of Eligibility from a prior VA loan. Once you obtain a VA-backed mortgage, that COE is closed out, showing you used that entitlement.
However, for refinancing an existing VA loan, the lender can reuse the COE used on the original loan. You only need a new COE if you have purchased additional homes using your entitlement or restored eligibility lost due to payment defaults.
How to Get a VA Certificate of Eligibility
You have two options to request your Certificate of Eligibility:
- Apply online – Veterans can use eBenefits account to request COE electronically. Usually available within 1-2 days.
- Submit VA Form 26-1880 by mail – Download the form and mail it to your VA regional loan center. Takes 7-10 business days.
No matter how you apply, be sure to save a copy of your COE in a safe place for your records.
VA Home Loan Benefits and Options
In addition to the basic VA purchase loan, the VA program offers other types of loans and options for eligible borrowers.
Loan Options
The main loan types available with VA home financing include:
- VA Purchase Loan – For buying a primary residence with 0% down.
- VA Cash-Out Refinance – Taking equity out of an existing home with a VA loan.
- VA Streamline Refinance – Simplified refinancing of a current VA mortgage.
- VA IRRRL Refinance – Rate/term refinance of a VA loan to lower interest rate or payment.
Am I Eligible for a VA-Backed Purchase Loan?
You may qualify for a VA-backed loan to purchase a home if:
- You served at least 90 days active duty during wartime or 2+ years otherwise.
- You commit to at least 90 days active duty as a current servicemember.
- You’re the surviving spouse of a veteran who died on active duty.
- You were discharged for a service-connected disability.
Why Might I Want a VA-Backed Purchase Loan?
A VA purchase loan offers huge benefits for eligible home buyers:
- Requires no down payment – Buy with 100% financing.
- No mortgage insurance – Avoid paying private mortgage insurance (PMI).
- Lower rates – VA loans often have lower interest rates versus conventional loans.
- Looser guidelines – More flexible credit score and debt requirements versus conventional mortgages.
VA Loan FAQs
- How many times can you use VA loan benefits? You can reuse your VA entitlement until it is exhausted. VA loans are a repeatable benefit.
- Do you have to be a first-time homebuyer? No, the VA loan program is open to both first-time and repeat home buyers.
- How soon can I get another VA loan? You must pay off any prior VA loan in full before getting approved on a new VA mortgage.
- Can I use a VA loan to refinance? Yes, VA loans can be used to refinance non-VA loans into a VA mortgage to access benefits.
Purchase and Refinancing with VA Loans
In addition to buying a home, VA loans allow eligible borrowers to refinance existing mortgages under certain conditions.
How Can I Buy a Home with a VA-Backed Purchase Loan?
The VA home loan program allows qualified veterans, active duty servicemembers, and surviving spouses to purchase a primary residence with no down payment.
Here are the key steps:
- Obtain your Certificate of Eligibility from the VA.
- Shop mortgage lenders and apply for pre-approval.
- Work with a real estate agent to find a home within your budget.
- Make an offer and enter into a purchase agreement.
- Allow lender to appraise home and finalize loan approval.
- Close on your new home!
Refinancing a VA Home Loan
For those with existing VA mortgages, refinancing to a lower rate is simple with these VA streamline options:
- IRRRL Refinance – Lower rate/payment on current VA loan. Limited credit check and documentation.
- Cash-Out Refinance – Take equity out of home via new VA loan. Requires full underwriting.
Talk to lenders to see if refinancing your VA loan makes sense for your financial situation.
VA Home Loan Eligibility
To qualify for a VA home loan, you must:
- Meet active duty service requirements
- Have sufficient income and credit
- Occupy home as primary residence
- Use full entitlement on purchase unless currently serving
- Pay off any prior VA loans
Fees and Limits with VA Loans
When obtaining a VA home loan, there are certain costs and loan limits borrowers should be aware of.
Will I Have to Pay Any Fees with My Loan?
The main fee associated with VA loans is the VA funding fee. This is an upfront fee paid to VA when you close the loan, based on the loan amount and down payment:
- 1.4% with 5%+ down for first-time use
- 1.65% with 10%+ down for subsequent use
- 3.6% with 0% down for subsequent use
This fee can be financed into the loan instead of paying it at closing. Additionally, normal closing costs like appraisal fees and origination charges apply.
What Is the VA Loan Limit?
For 2022, the baseline VA loan limit is $647,200 but it is higher in certain counties. High-cost areas like San Francisco and New York City can qualify for VA loans up to $1,233,000. Veterans with full entitlement can qualify for loans up to the VA county limit.
You can check your county’s limit on the VA website’s loan limits page. The VA loan limits are adjusted annually based on local home prices. Veterans with partial entitlement may have lower loan limits.
Advanced Topics
Let’s discuss some more in-depth aspects of VA loans.
VA Funding Fee: Everything to Know About VA Loan Costs
The VA funding fee is the main cost specific to VA loans. Here are key facts about the VA funding fee:
- Paid to VA at closing
- Ranges from 1.4% – 3.6% of loan amount
- Based on down payment and repeat use
- Can be financed into loan
- Waived for disabled veterans
The funding fee helps the VA cover costs of the loan program. First time users with 5% down pay a 1.4% fee. The fee is higher for repeat users or smaller down payments. Veterans with service-connected disabilities can request a funding fee waiver.
How to Restore VA Entitlement
If you previously used up your VA home loan benefit, you may be able to restore your full entitlement. Reasons to restore eligibility include:
- Prior VA loan paid off in full
- Joint veteran spouse becomes single
- Received additional periods of active duty service
To request restoration of entitlement, file VA Form 26-1880 along with documents showing eligibility. If approved, you’ll regain access to full VA loan benefits.
Tips for Finding the Best VA Lender
Not all lenders are created equal when it comes to VA loans. Here are tips for picking the right VA mortgage lender:
- Compare interest rates and closing costs between lenders
- Ask about origination and processing fees
- Look for extensive experience with VA loans
- Check reviews and complaints with the CFPB
- Prioritize excellent customer service
- Make sure they handle the full loan process from start to finish
Taking time to find the ideal VA loan lender will ensure you get the best financing experience, rate, and terms.
Additional Resources
For more help understanding and using VA home loans, check out these VA resources:
- VA Home Loans – https://www.benefits.va.gov/homeloans/
- VA Loan Limits – https://www.va.gov/housing-assistance/home-loans/loan-limits/
- VA Lenders – https://www.va.gov/housing-assistance/home-loans/find-a-lender/
- VA Loan Calculator – https://www.va.gov/housing-assistance/home-loans/loan-calculator/
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